TronicView Decline in Home Sales: In a challenging market marked by soaring mortgage rates and escalating home prices, numerous homebuyers retreated from the resale housing sector last month, dealing a blow to sales, according to a report by the National Association of Realtors (NAR) released on Tuesday. During October, previously owned home sales experienced a significant 4.1% decline compared to the preceding month, reaching an annualized rate of 3.79 million units, revealed the NAR.
The decline in home sales was not only 14.6% below the same period last year but also fell short of economists’ predictions, who had anticipated a higher rate of 3.90 million units, as indicated by a Bloomberg poll.
The median home price witnessed a robust year-over-year increase of 3.4%, constituting the fourth consecutive month of annual gains and marking the most substantial surge since November 2022. At $391,800, the median price achieved a historic high for the month of October.
NAR Chief Economist Lawrence Yun expressed the challenges faced by potential homebuyers, stating, “Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation. Multiple offers, however, are still occurring, especially on starter and mid-priced homes.”
Despite the current market conditions, the NAR projects a 15% increase in existing home sales in 2024 after a predicted 18% decline this year. The association anticipates a potential relief as mortgage rates are expected to decrease to a range of 6% to 7% during the upcoming spring selling season.
Mark Fleming, Chief Economist at First American, noted the recent decline in mortgage rates, suggesting a potential turnaround. He stated, “Existing home sales are likely to underwhelm again for October. How low can they go? Probably not much lower as more recently mortgage rates have fallen from the high point of 8% and mortgage applications are on the rise again.”
The subdued activity is widespread, with all four regions of the country reporting year-over-year declines in resale activity for October, according to the NAR.
In the West, sales dropped 1.4% from the previous month to an annualized rate of 690,000 in October, down 14.8% from a year prior. The median price in the West rose to $602,200, reflecting a 2.3% increase from the same period last year.
The South witnessed a 7.1% decline in home sales from September, reaching an annual rate of 1.69 million in October, down 14.6% from a year ago. The median price in the South climbed to $357,700, representing a 3.5% increase from October 2022.
In the Midwest, home sales remained unchanged from the previous month, recording an annual rate of 930,000 in October, yet still marking a 13.9% decline from one year ago. The median price in the Midwest reached $285,100, showing a 4.2% annual increase.
Northeast saw a 4% decline in home sales from the annual rate of 480,000 in October, down 15.8% compared to the previous October. The median price in the Northeast rose to $439,200, reflecting a 7.5% increase from a year earlier.
Despite the challenges, Lawrence Yun highlighted the prevalence of multiple-offer situations, noting, “In fact, 28% of homes that were sold in the month of October sold above list price. It shows somewhat [more] multiple-offer situations compared to one year ago, despite the higher mortgage rate condition.”
The burden of high rates is evident, with the 30-year fixed-rate mortgage surging to 7.76% in October, the highest point since September 2000, according to Freddie Mac. Danielle Hale, Chief Economist at Realtor.com, emphasized, “Housing affordability continues to be a major headwind,” indicating the dilemma faced by potential buyers in deciding whether to wait for better conditions or act swiftly.
The dearth of housing inventory remains a significant factor contributing to rising prices, compounded by higher mortgage rates. Yun stated, “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. So [it’s a] strange story. Lack of inventory along with higher mortgage rates are really hindering home sales.”
While signs of a weakening “lock-in” effect are emerging, with a slight increase in homes for sale at the end of October, the inventory remains at historic lows. Altos Research reported an unusual uptick in new listings for early November, but Mike Simonsen, Founder and President of Altos Research, clarified, “We’re not anywhere close to a market with a glut of homes for sale.” With a 3.6-month supply of unsold inventory at the current sales pace, the market is still considered less than healthy, requiring at least six months of inventory for stability.
In conclusion, the persistent challenges of elevated mortgage rates and escalating home prices have culminated in a significant decline in home sales, painting a complex picture for prospective buyers in the current real estate landscape.
Source: Yahoo Finance
