In October, the number of homes sold that were previously owned went down by 4.1% compared to September. The National Association of Realtors says this is equal to a rate of 3.79 million units per year when adjusted for seasonal changes.
This is the slowest rate of sales since August 2010. Analysts were expecting a smaller decrease, down to 3.9 million units. Compared to the same time last year, sales were down by 14.6%.
What Happened in the Housing Market in October
The count of sales in October is based on deals probably made in August and September. In August, the average interest rate for a 30-year fixed mortgage was almost 7%, but it went up quickly and reached over 8% by mid-October. Since then, rates have come down a bit.
Lawrence Yun, the chief economist at the National Association of Realtors (NAR), mentioned that potential home buyers faced challenges in the past month because of the ongoing shortage of available homes and the highest mortgage rates in a long time. He noted that despite these difficulties, there are still multiple offers, especially for starter and mid-priced homes. However, in the higher-priced market, sellers are making price concessions.
By the end of October, there were 1.15 million homes available for sale, which is 5.7% less than the previous year. This is roughly half the number of homes available before the Covid pandemic. With the current rate of sales, this represents a 3.6-month supply. In real estate, a balanced market between buyers and sellers is typically considered to have a six-month supply.
Housing Market Trends in October
Limited availability of homes kept prices high. In October, the median price for an existing home sold was $391,800, showing a 3.4% increase from the previous year ($378,800). Prices went up across all regions in the country. These yearly price increases have been growing for four consecutive months, with approximately 28% of homes selling above their listed price.
Even though the situation remains challenging for buyers, home sellers have benefited from rising prices year after year. Lawrence Yun mentioned, “Home prices have reached a new all-time high for the month of October. In fact, the typical homeowner has seen their housing wealth increase by more than $100,000 over the past three years.”
Sales declined across all price ranges up to $750,000, but there was an uptick in the sales of more expensive homes. Homes priced above $1 million increased by just over 9% compared to the previous year.
Wealthier buyers typically either avoid using mortgages or are less affected by monthly interest rate changes. Lawrence Yun also pointed out that there are more homes available for sale in the higher-end market.
In terms of buyer demographics, first-time buyers made up 28% of October sales, which remains unchanged from the previous year and is still notably lower than the historical average of 40%. Individual investors purchased 15% of homes, a decrease from 18% in September and 16% from a year ago. All-cash transactions constituted 29% of sales, up from 26% in October 2022.
Conclusion
In October, existing home sales decreased by 4.1%, marking the slowest pace since August 2010. The housing market faced challenges with a shortage of homes and rising mortgage rates. Despite this, high-end home sales increased, contributing to a 9% rise in prices above $1 million. Wealthier buyers, less impacted by interest rates, dominated, with 29% of sales in all-cash transactions.
