The sale of existing homes in the United States dipped by almost 15 percent over the past year amid tight inventory and elevated mortgage rates, according to the National Association of Realtors (NAR).
Existing home sales fell from 4.44 million units last October to 3.79 million in October 2023, registering an annual decline of 14.6 percent, according to a Nov. 21 NAR press release. On a monthly basis, sales fell by 4.1 percent from September. “Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” said NAR Chief Economist Lawrence Yun.
In an interview with Fox, Daniel Vielhaber, an economist at insurance firm Nationwide, said that “existing-home sales fell in October to the lowest level since 2010 as the housing market remains paralyzed by high mortgage rates.”
Inventory at the end of October was 1.15 million units, shrinking by 5.7 percent from a year ago. At the current pace of sales, it would take just 3.6 months to deplete the current inventory, far below the six months seen as a healthy level by experts.
Meanwhile, the average interest rate on a 30-year fixed-rate mortgage for the week ending Nov. 21 was 7.29 percent, more than double the 3.10 percent roughly two years back, according to data from Freddie Mac. The current rate is lower than the recent peak of 7.79 percent hit last month.
Mr. Yun pointed out that the third straight weekly decline in mortgage rates stirred up “buying interest.” He expects the issue of low housing inventory to improve “after this winter and heading into the spring.” As more inventory gets added, there would be “more home sales,” he said.
The NAR economist pointed out that despite market challenges, multiple offers are still occurring, especially on starter and mid-priced homes. In the upper end of the market, there have been price concessions, he stated.
The lower inventory and the resultant supply crunch is largely due to the high mortgage rates. Many homeowners are reluctant to sell their properties as this could mean they would have to buy a new home at high interest rates.
Among the four major U.S. regions, existing home sales dipped on a monthly basis in three—Northeast, West, and South. In the Midwest, sales remained unchanged. On a yearly basis, all four regions saw a decline in sales.
More Listings, Seller-Buyer Dynamics
Amid tight inventory levels, there are signs that more supply may be incoming, according to Realtor.com economic research analyst Hannah Jones.“New listings registered lower than prior year levels from mid-2022 through roughly 4 weeks ago, as the mortgage rate lock-in effect freezes homeowners with low-rate existing mortgages in place,” she wrote in a Nov. 22 analysis.
“Over the last three weeks, however, the trend has reversed and new listings during this week outpaced the same week in the previous year by 5.0 percent. With the number of homes for sale already limited, a pick up in new listings is a welcome change to recent inventory woes.”
Further evidence of additional supply came from real estate brokerage Redfin, which pointed out in a Nov. 22 press release that new listings rose by 5.2 percent annually for the four weeks ending Nov. 19.
This is the “biggest uptick in over two years,” it said while adding that “the increase is partly because new listings were falling at this time last year.”
According to Heather Mahmood-Corley, a Redfin Premier real estate agent in Phoenix, a lot more owners have approached her to list their homes for sale, which she says is “a reversal from recent months.”
However, “while I’m seeing more sellers in the market, they’re squirrely too. They’re backing out when they don’t get the price they want,” she said, according to a Nov. 17 press release.
On the other side, there is a “lot of cold feet” among prospective buyers, said Redfin Tampa Sales Manager Eric Auciello. “Home prices are high, mortgage rates are high, and insurance costs are high, and when buyers see the final number, a lot of them are backing out.”
Home affordability has deteriorated over the past years, according to NAR data. In 2020, the median price of an existing single-family home was $300,200. This rose to $399,200 in September 2023.
During this period, mortgage rates jumped from 3.17 to 7.28 percent. Monthly mortgage payments rose from $1,035 to $2,185. As a consequence, people now have to shell out 26.6 percent of their monthly incomes on mortgage payments compared to 14.7 percent in 2020.
The qualifying income necessary to become eligible for a median-priced existing single-family home has more than doubled from $49,680 to $104,880.
