In this May 21, 2014 photo, a sign sits in front of a new home for sale in West Des Moines, Iowa. The Commerce Department reports on sales of new homes in April on Friday, May 23, 2014. AP Photo/Charlie Neibergall

Existing home sales fall to lowest level since 2010 thanks to high mortgage rates

Zachary Halaschak November 21, 10:05 AM November 21, 10:22 AM Video Embed

Existing home sales once again slowed in October, falling to their lowest level in more than a decade amid higher mortgage rates.

Home sales in October slowed 4.1% to a seasonally adjusted annual rate of 3.79 million, the National Association of Realtors reported on Tuesday, as higher mortgage rates priced out many would-be buyers and led many homeowners to avoid selling and having to reenter the home loan market.

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The pace of home sales was down 14.6% from the year before.

Total housing inventory at the end of October was 1.15 million units, up 1.8% from September but down 5.7% from a year ago.

The median price of an existing home in October was $391,800, an increase of 3.4% from the year before. Additionally, homes typically remained on the market for 23 days in October, up from 21 days in September.

“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” NAR chief economist Lawrence Yun said.

The news comes as mortgage rates remain at levels not seen in more than two decades.

As of Thursday, the average rate on a 30-year, fixed-rate mortgage was 7.38%, according to Mortgage News Daily, which tracks daily changes in rates. That is down from a recent peak of above 8%, but that is far higher than in the years prior to the pandemic and nearly double the lows notched during the pandemic.

Mortgage rates have risen in the wake of the Federal Reserve’s campaign to tighten monetary policy. The Fed has raised its target rate, which applies to a short-term market separate from the mortgage market, to a range of 5.25% to 5.50%.

The revisions have sent shock waves through the housing market and affected the sale of new homes.

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New home sales rose 12.3% from August to September to a seasonally adjusted annual rate of 759,000, according to the U.S. Census Bureau. The number of new homes sold was the highest since February last year. Sales in September were 22.9% higher than in September 2022.

Part of the reason new home sales might be strong is because people who locked in low mortgages during the pandemic aren’t selling because of the higher mortgage rates now, taking away existing home inventory and putting pressure on new home sales.

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