High mortgage rates continue to result in slumping U.S. home sales, which fell another 4.1% in October and hit an annualized rate of 3.79 million units.
The latest data from the National Association of Realtors show that the annualized rate is 14.6% lower than last year and comes up short of the 3.90 million units that had been projected by economists polled by Bloomberg, Yahoo Finance reported.
The average 30-year fixed mortgage rate currently stands around 7.44%, according to Freddie Mac. It peaked around 7.79% in October.
At the same time, with fewer homes listed on the market, affordability is not within reach of many who would otherwise seek to buy homes. There were 1.15 million homes on the market last month, down about 5.7% from a year ago. Those who are locked into lower mortgage rates have shown less inclination to sell this year.
“Prospective homebuyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” NAR chief economist Lawrence Yun said. “Multiple offers, however, are still occurring, especially on starter and mid-priced homes.”
Despite the decline in home sales, tougher competition for properties that are for sale pushed the median home price in the U.S. up by 3.4% year-over-year last month. That’s the fourth straight month the median price has risen on an annualized basis. The median price stood at $391,000.
“The odds of substantially improved sales in the near term remain very low,” Daniel Vielhaber, an economist at Nationwide in Columbus, Ohio, told Reuters. “Looking into the first half of 2024, supply promises to remain a significant roadblock as mortgage rates are expected to remain high.”
Other economists have more optimistic predictions for the housing market. They expect the Federal Reserve’s tight monetary policy to ease next year, bringing mortgage rates to a range between 6-7%.
The NAR projects sales of existing homes to climb 15% next year, compared to an 18% decline in 2023.
Yun noted that the market remains squeezed in both directions.
“The factors limiting sales are the same two important factors, which is mortgage rates can drain affordability for the buyers, but those who can handle affordability, inventory is simply not there,” Yun said during a press call. “So (it’s a) strange story. Lack of inventory along with higher mortgage rates are really hindering home sales.”
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