High Mortgage Rates Curb Sales

For the ninth consecutive month, existing-home sales fell, according to the National Association of Realtors (NAR). What’s more, both month-over-month and year-over-year sales declined in every region of the country. According to Lawrence Yun, chief economist for NAR, the decline can be attributed partly to climbing mortgage rates barring potential homebuyers from qualifying for a mortgage. “The impact is greater in expensive areas of the country and in markets that witnessed significant home price gains in recent years,” he explained. However, after peaking in mid-November, mortgage rates have started to drop, leading Yun to predict that home sales may be reaching their bottom in the current housing cycle.

Mixed Market Activity
Some areas of the country are still experiencing multiple offers on homes for sale as a result of tight inventory levels. According to Yun, 24% of homes received offers over the asking price. “Conversely, homes sitting on the market for more than 120 days saw prices reduced by an average of 15.8%,” Yun said. For all housing types, the median existing-home price climbed 6.6% from a year earlier. Prices increased in every sales region in the country, marking the 128th month in a row of year-over-year price increases, a new record. The average property was available for 21 days in October, up from 19 days a month ago and 18 days a year ago. Of all the homes sold in October, 64% were available for less than 30 days.

Fewer First-Time Buyers
High mortgage rates may be impacting one group in particular, as first-time home buyers accounted for only 28% of all sales in October, down from 29% both a month and a year ago. According to the NAR “2022 Profile of Home Buyers and Sellers,” the annual share of first-time buyers was 26%, the lowest on record. All-cash sales, meanwhile, represented 26% of all October transactions, up from 22% in September and 24% in October 2021. Individual investors and second-home buyers, who account for many all-cash purchases, represented 16% of the market in October, up from 15% a month ago but down from 17% a year ago.

Regional Breakdown

• Northeast: Existing-home sales annual rate of 570,000; a decrease of 6.6% from September 2022 and 23% from October 2021. At $408,700, the median sales price increased 8% from October 2021.

• Midwest: Existing-home sales annual rate of 1.08 million; a decrease of 5.3% from September 2022 and 25.5% from October 2021. At $274,500, the median sales price increased 5.9% from October 2021.

• South: Existing-home sales annual rate of 1.98 million; a decrease of 4.8% from September 2022 and 27.2% from October 2021. At $346,300, the median sales price increased 8% from October 2021.

• West: Existing-home sales annual rate of 800,000; a decrease of 9.1% from September 2022 and 37.5% from October 2021. At $588,400, the median sales price increased 5.3% from October 2021.