WASHINGTON (Reuters) – U.S. existing home sales dropped to the lowest level in more than 13 years in October as the highest mortgage rates in two decades and a dearth of houses drove buyers from the market.
Existing home sales tumbled 4.1% last month to a seasonally adjusted annual rate of 3.79 million units, the lowest level since August 2010, the National Association of Realtors said on Tuesday. Home resales are counted at the closing of a contract.
October’s sales likely reflected contracts signed in the prior two months, when the average rate on the popular 30-year fixed-rate mortgage jumped to levels last seen in late 2000.
Economists polled by Reuters had forecast home sales would slide to a rate of 3.90 million units. Sales fell in the Northeast, West and the densely populated South, but were unchanged in the Midwest. Home resales, which account for a big chunk of U.S. housing sales, plunged 14.6% on a year-on-year basis in October.
“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” said Lawrence Yun, the NAR’s chief economist.
The rate on the popular 30-year fixed-rate mortgage averaged 7.31% in the final week of September, before peaking at 7.79% in late October, the highest level since November 2000, according to data from mortgage finance agency Freddie Mac.
Though it has since retreated following data this month showing the labor market cooling and inflation subsiding, the rate averaged a still-high 7.44% last week.
There were 1.15 million previously owned homes on the market last month, down 5.7% from a year ago. At October’s sales pace, it would take 3.6 months to exhaust the current inventory of existing homes, up from 3.3 months a year ago.
A four-to-seven-month supply is viewed as a healthy balance between supply and demand. With supply still tight, multiple offers were the norm in some areas, keeping house prices on an upward trend. The median existing house price increased 3.4% from a year earlier to $391,800, the highest for any October.
Properties typically remained on the market for 23 days in October, up from 21 days a year ago. Sixty-six percent of homes sold in October were on the market for less than a month.
First-time buyers accounted for 28% of sales, as they did a year ago. This share is well below the 40% that economists and realtors say is needed for a robust housing market.
All-cash sales accounted for 29% of transactions compared to 26% a year ago. Distressed sales, including foreclosures, represented only 2% of transactions, virtually unchanged from the prior year.
(Reporting by Lucia Mutikani; Editing by Paul Simao)