WASHINGTON- US existing home sales tumbled for a record ninth straight month in October as the 30-year fixed mortgage rate hit a 20-year high and prices remained elevated, pushing homeownership out of the reach of many Americans.
Despite the broad decline in sales reported by the National Association of Realtors on Friday, housing supply remained tight, with considerably fewer homes coming on the market than in the prior year. The housing market has been the sector hardest hit by aggressive Federal Reserve interest rate hikes that are aimed at quelling high inflation by dampening demand in the economy.
“The combination of rising house prices and mortgage rates have sent housing affordability plummeting,” said Daniel Vielhaber, an economist at Nationwide in Columbus, Ohio. “The decline in affordability is by design to some extent. The Fed’s goal of slowing economic demand by raising interest rates starts with home sales.”
Existing home sales dropped 5.9 percent to a seasonally adjusted annual rate of 4.43 million units last month. Outside the plunge during the initial phase of the COVID-19 pandemic in the spring of 2020, this was the lowest level since December 2011.
Economists polled by Reuters had forecast home sales would tumble to a rate of 4.38 million units.
House resales, which account for a big chunk of US home sales, slumped 28.4 percent on a year-on-year basis in October. That was the largest drop since February 2008.
The report followed on the heels of news on Thursday that single-family homebuilding and permits for future construction tumbled to the lowest levels since May 2020. Housing inventory also declined.
The 30-year fixed mortgage rate breached 7 percent in October for the first time since 2002, according to data from mortgage finance agency Freddie Mac. The rate averaged 6.61 percent in the latest week. The US central bank’s rate-hiking cycle, the fastest since the 1980s, has raised the risks of a recession.
A separate report from The Conference Board on Friday showed the leading indicator, a gauge of future US economic activity, declined 0.8 percent in October after sliding 0.5 percent in September. The index has now dropped for eight straight months.
“The trajectory for growth looks weak,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina. “A deteriorating housing market, nagging inflation and an aggressive Fed puts the economy on unsure footing for 2023.”
Stocks on Wall Street rose. The dollar was steady against a basket of currencies. US Treasury prices fell.
Existing home sales dropped sharply in all four regions. Sales also declined across all price points on a year-on-year basis. Even as demand weakens, housing supply remains tight, limiting the slowdown in house price inflation.
The median existing house price increased 6.6 percent from a year earlier to $379,100 in October. That marked 128 straight months of year-over-year house price increases, the longest such streak on record. Though price growth has slowed from June’s peak, in line with normal trends, the NAR estimated that prices in October were considerably above their pre-pandemic level.
