Home sales may have fallen last month, but home sellers still appear to hold the upper hand. Existing-home sales for single-family homes, townhomes, condos and co-ops dropped 4.1% in October and are down nearly 15% compared to one year ago, the National Association of REALTORS® reported Tuesday. Despite slowing sales, buyers are facing a few key issues: steep competition against other buyers for a limited number of homes on the market, rising home prices and the highest mortgage rates in 20 years.
“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” says NAR’s Chief Economist Lawrence Yun. “Multiple offers are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market.”
Housing inventories remain tight. While the number of homes for sale did eke out a 1.8% uptick in October compared to September, inventories remain 5.7% below a year ago and continue to be at historical lows. Many homeowners remain reluctant to sell, even as their equity rises.
Home Sellers See Soaring Equity
Refusing to give up a previously locked-in ultra-low mortgage rate, homeowners are holding onto their properties. However, increasing home prices may be tempting to some. The median existing-home sales price rose 3.4% compared to a year ago, reaching $391,800. This marks the fourth consecutive month for year-over-year price increases, NAR reports.
“While circumstances for buyers remain tight, home sellers have done well as prices continue to rise year over year, including a new all-time high for the month of October,” Yun says. “In fact, a typical homeowner has accumulated more than $100,000 in housing wealth over the past three years.”
Homeowners who do list are seeing quick sales. Sixty-six percent of homes sold in October were on the market for less than a month. Properties typically remained on the market just 23 days in October, according to NAR’s data.
Home Buyers Struggle With Affordability, Inventory
On the other hand, home buyers are facing rising home prices and mortgage rates. The 30-year fixed-rate mortgage averaged 7.44%, as of Nov. 16, up from 6.61% a year ago, Freddie Mac reported.
With mortgage rates high, all-cash sales are rising. All-cash home sales accounted for 29% of transactions in October, up from 26% a year earlier, NAR’s data shows. Meanwhile, first-time home buyers, who do not have equity to leverage from a previous home sale, are feeling forced to come up with more money to get into homeownership. First-time buyers accounted for 28% of sales in October, while historically, the market share for first-time home buyers is 32%.
If mortgage rates drop, home sales could rise, helping to improve affordability conditions for would-be buyers, Yun says. NAR is forecasting mortgage rates to fall, likely reaching a 6% to 7% range by spring. Plus, “mortgage rates have fallen for the third straight week, stirring up buying interest,” Yun says. “Though limited now, expect housing inventory to improve after this winter and heading into the spring. More inventory will result in more home sales.”
Across the country, existing-home sales fell last month in the Northeast, South and West, but held steady in the Midwest. All four major regions of the country posted sales declines compared to last year’s pace, NAR reports. Here’s a closer look at how home sales fared across the country last month:
- Northeast: Sales fell 4% in October compared to September, reaching an annual rate of 480,000. Home sales are down 15.8% from October 2022. Median price: $439,200, up 7.5% from the previous year.
- Midwest: Sales were unchanged in October compared to the prior month, settling at an annual rate of 930,000. Sales are down 13.9% from one year ago. Median price: $285,100, up 4.2% from October 2022.
- South: Existing-home sales dropped 7.1% from September, reaching an annual rate of 1.69 million. They are down 14.6% from the previous year. Median price: $357,700, up 3.5% from one year ago.
- West: Existing-home sales fell 1.4% from the previous month, reaching an annual rate of 690,000. Home sales are down 14.8% from one year ago. Median price: $602,200, up 2.3% from October 2022.