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Home sales fell for the ninth straight month in October

Home sales fell for the ninth straight month in October
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A “For Sale” sign outside a home in Albany, California on Tuesday, May 31, 2022.

David Paul Morris | Bloomberg | Getty Images

Home sales fell for the ninth straight month in October as higher interest rates and rising inflation held back buyers.

According to the National Association of Realtors, pre-owned home sales fell 5.9% from September to October. That’s the slowest pace since December 2011, except for a very brief dip early in the Covid-19 pandemic.

The October reading brought sales to a seasonally adjusted annualized pace of 4.43 million units. Revenue fell 28.4% year over year.

Even though sales are slow, supply is still stubbornly low. At the end of October, 1.22 million homes were for sale, down almost 1% both month-on-month and year-on-year. That’s a 3.3 month supply at the current sales pace. Historically, a balanced market is viewed as a six-month supply.

The median price of an existing home sold in October was $379,100, up 6.6% from a year earlier. However, price gains are shrinking as the seasonal drop in house prices seems to be much sharper than usual this time of year.

“Inventory is still tight, which is why some homes for sale are still getting multiple bids,” said Lawrence Yun, NAR’s chief economist. “In October, 24% of homes were getting more than asking price. Conversely, for homes that have been on the market for more than 120 days, their prices have fallen by an average of 15.8%.”

Overall, homes were signed in 21 days in October, versus 19 days in September and 18 days in October 2021. More than half, 64% of the homes sold in October 2022 were on the market for less than a month, suggesting it is still a strong demand if the house is priced right.

While sales are now declining in all price ranges, they are weakening the most in the $100,000 to $250,000 range and the $1 million+ range. At the lower end, this is likely due to the severe shortage of available homes in this price range. Big stock market losses, along with inflation and global economic uncertainty, could weigh on high-end buyers.

First-time buyers, who are probably most sensitive to the rise in mortgage rates, accounted for just 28% of sales, up from 29% a year earlier. This cohort typically accounts for 40% of home purchases. Investors, or second-home buyers, pulled out, buying just 16% of homes sold in October, down from 17% in October 2021.

Mortgage rates are now more than double the record lows seen earlier this year. But recent volatility in interest rates is also wreaking havoc on potential buyers. Interest rates shot up in June, leveled off in July and August, and rose even further in September and October. Then they went back down pretty sharply last week.

“For many, just the weekly volatility of mortgage rates, which was three times higher than usual in 2022could be a good reason to wait,” noted Danielle Hale, chief economist at Realtor.com. “With weekly changes in mortgage rates causing monthly housing expenses to fluctuate in excess of $100 for an average priced house, it’s difficult to know how to set a budget and stick to it.”

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