Home sales declined in October to their slowest pace in 13 years as mortgage rates soared to their highest levels in decades, pushing both sellers and buyers out of the market.
Sales of previously owned homes, which account for most of the U.S. housing market, came in at a seasonally adjusted annual rate of 3.79 million for October, the National Association of Realtors said Tuesday. This was 4.1 percent below the September pace and 14.6 percent below the clip recorded a year earlier.
Economists had expected sales to decline only slightly from a pace of 3.96 million to 3.91 million.
“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” Lawrence Yun, the trade group’s chief economist, said in a statement. “Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market.”
Mortgage rates soared in October, with the standard 30-year fixed rate rising from 7.3 percent to 7.8 percent. In October of the prior year, rates were below seven percent and closer to 6.5 percent.
Mortgage rates have since declined. Data from Freddie Mac shows the 30-year fixed has fallen to 7.4 percent. This could encourage more home buying in the months ahead.
Rates have declined as evidence has mounted that inflation is coming down at or ahead of the forecasts of the Federal Reserve. The market now is convinced that the Fed’s days of hiking rates are in the past and the Fed is likely to cut rates midway through next year.
“Fortunately, mortgage rates have fallen for the third straight week, stirring up buying interest,” Yun said. “Though limited now, expect housing inventory to improve after this winter and heading into the spring. More inventory will result in more home sales.”