By Geoffrey Smith
Investing.com -- Existing home sales in the U.S. posted their steepest decline in eight months in October, under pressure from sky-high prices and rising borrowing costs.
The National Association of Realtors said sales fell 5.9% from September, their ninth straight monthly drop, leaving them down 28.4% from a year earlier.
The median existing-home sales price rose 6.6% on the year to $379,100, it added, a slowdown from the 8.0% rise noted in September. Sales declines were sharpest in those regions which had posted the biggest gains during the early stage of the pandemic, it added.
The inventory of unsold existing homes also fell for the third consecutive month to stand at 1.22 million by month-end, the equivalent of 3.3 months' supply at the current monthly pace of sales, up from a ratio of 3.1 in September and 2.4 a year ago. The NAR nonetheless said that the market remains tight due to the shortage of homes that fit current demand patterns. As such, many continue to receive multiple bids.
"More potential homebuyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher," said NAR Chief Economist Lawrence Yun. "The impact is greater in expensive areas of the country and in markets that witnessed significant home price gains in recent years."
Reference 30-year mortgage rates hit a 20-year high of 7.16% in October. They have eased off a little this month as fears of a U.S. recession next year have strengthened. The Mortgage Bankers Association put the reference rate at 6.90% last week.
Oxford Economics analyst Nancy Vanden Houten said she expects to remain under pressure through most of next year due to "eroded affordability, a recession, and still-tight supplies." On the plus side, she said in a note to clients, "the recent moderation in home price growth and the latest decline in mortgage rates – if it is sustained – could provide some modest support to home sales."
Vanden Houten expects annual house price growth to turn negative next year, but to bottom out at a rate of only -5.0% by the middle of 2023, still leaving prices substantially higher than they were before the pandemic.