US home sales slumped in October to slowest pace in more than 16 years as mortgage rates surged

Sales of previously occupied U.S. homes slumped in October to their slowest pace in more than 16 years as mortgage rates climbed sharply, ratcheting up borrowing costs for aspiring homebuyers.

Existing home sales fell 5.5% last month from September to a seasonally adjusted annual rate of 3.75 million units, the National Association of Realtors said Thursday. That’s the slowest annual sales pace since August 2010, when the market was still reeling from the late-2000s U.S. housing crash.

Sales sank 8.8% compared with October last year. The latest sales tally fell short of the 3.8 million pace economists were expecting, according to FactSet.

“It is just a tough market for buyers and sellers,” said Lawrence Yun, NAR’s chief economist.

Home sales have been mostly hovering close to a 4-million annual pace going back to 2023, far short of the historic norm that is closer to 5.2 million. October is the third month in a row that the annual sales pace has remained below 4 million.

The sharp pullback in sales comes as the average rate on a 30-year mortgage climbed above 7% in September and hit its highest level in nearly three years last month.

Despite the latest pullback in sales, home prices continued to march higher nationally last month, albeit at a slower clip. The U.S. median sales price rose 0.4% in October from a year earlier to $416,700, an all-time high for the month of October based on data going back to 1999, NAR said. Home prices have risen on an annual basis for 40 months in a row.

The U.S. housing market has been in a slump since 2022, when mortgage rates began to climb from pandemic-era lows. Sales of previously occupied U.S. homes were essentially flat last year, stuck at a 30-year low.

This year, sales have been in a rut in large part due to rising mortgage rates, which have risen sharply in the months since the war between the U.S. and Iran started in late February. Expectations of higher inflation amid surging oil prices have pushed up the long-term bond yields that lenders use as a guide to pricing home loans, driving mortgage rates higher.

The average rate on the benchmark 30-year mortgage reached 7.4% early last month, its highest level in nearly three years, and has remained above 7% since. It briefly dipped below 6% before the war started.

Many of the homes purchased last month likely went under contract in September and August, when the average rate on a 30-year mortgage ranged from 6.65% to 7.03%, according to Freddie Mac.

The sharp rise in mortgage rates, which can add hundreds of dollars a month in costs for borrowers, has led many would-be home shoppers to put their home shopping plans on hold.

However, those who can afford to buy at current rates, or pay all cash, have a much wider selection of homes to choose from than they’ve had in years as properties sit on the market longer.

Although home inventory levels remain below historical norms, there were 1.59 million unsold homes at the end of last month — the highest level of unsold inventory on the market since November 2019, NAR said.

All told, unsold home inventory rose 1.3% last month from September and climbed 4.6% from October last year, NAR said.

October’s month-end inventory translates to a 5.1-months’ supply at the current sales pace, the largest since November 2015. Traditionally, a 4- to 6-month supply is considered a balanced market between buyers and sellers.