Home sales have fallen to their lowest level since 2010, according to a new report, largely because of high mortgage rates.
Mario Tama/Getty Images
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Mario Tama/Getty Images
The real estate market has finally emerged from the pattern of stagnation it has been stuck in for more than four years – but not in the right direction.
Existing home sales in October fell to 3.75 million, an 8.8% decline in sales from a year earlier, according to the National Association of Realtors. The last time sales were this low was 16 years ago.
“It was a punch in the gut,” said Joel Berner, senior economist at Realtor.com. “We were expecting a mild month, but it won’t be the mildest month since 2010.”
Expensive mortgages are a big factor
This decline is mainly due to high mortgage rates.
In October, the average rate on a 30-year fixed-rate mortgage hit 7.40%, the highest since 2023. Rates have fallen a bit since then, but remain well above where they were a year ago.
Rising inflation and bond yields have driven up mortgage rates, but some of that slowdown in the housing sector was intentional.
The Federal Reserve raised its benchmark interest rate in September to increase the cost of borrowing, including home mortgages. Fewer home sales and other purchases mean less economic activity, which is what the Fed wants to achieve its goal of lower inflation.
Fed policymakers have signaled that another rate hike could come in December, which could further slow the housing market.
“It may seem like the Fed is continuing a cycle of raising rates to kick the housing market when it’s currently down, but in the long run the goal is really to keep inflation in check,” Berner said.
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