In October, existing home sales in the United States hit a 13-year low, affected by soaring mortgage rates and escalating property prices, deterring potential buyers from entering the market.

The National Association of Realtors reported a 4.1% drop in existing home sales last month compared to September, reaching a seasonally adjusted annual rate of 3.79 million. This figure fell short of economists’ expectations of 3.90 million sales, as per Forex Factory Data.

This decline mirrors a slump last seen in August 2010, during the housing market’s recovery from a significant crash. Home sales plummeted by 14.6% compared to the same period last year, marking five consecutive months of decline. The primary culprits behind this downward are climbing mortgage rates and a scarcity of available properties.

However, despite the decline in sales volume, home prices continue to rise from last year’s figures. The national median sales price surged by 3.4% from October 2022, reaching $391,800.

According to Lawrence Youn, the NAR’s chief economist, “The lack of inventory, coupled with higher mortgage rates, is significantly impeding home sales.”

The average rate on a 30-year mortgage remained above 7% in September, a period when many October sales would have been contracted. It has persisted above this mark since then, hitting a peak in late October at 7.79%, the highest average recorded since late 2000 as per Freddie Mac’s mortgage data. The most recent average rate stood at 7.44%.

These high mortgage rates translate to hundreds of additional dollars in monthly costs for borrowers, constraining their purchasing power in an already unattainable market for many Americans. Furthermore, they dissuade homeowners who secured considerably lower rates around 3% two years ago from selling their properties.

Despite the decline in sales, prospective homebuyers continue to grapple with a fiercely competitive market due to the chronic shortage of available homes, particularly those within the most affordable range. 

Homes put up for sale in the last month typically sold within a mere 23 days of listing, and approximately 28% of properties sold above their listed price, indicating continued multiple offers for many homes, as noted by the NAR.

In total, by the end of last month, there were 1.15 million homes available for sale, marketing a 1.8% increase from September, However, this inventory was down by 5.7% compared to October of the previous year, amounting to just a 3.6-month supply at the current sales pace. A balanced market typically sees a 4 to 5- month supply, indicating a continued imbalance between buyers and sellers.