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In October, the number of homes sold in the United States dropped to the lowest level in over 13 years. This happened because mortgage rates (the interest you pay on a home loan) were the highest in 20 years, and there were not enough houses available for people to buy.
Last month, the National Association of Realtors (NAR) reported that existing home sales dropped by 4.1% to a yearly rate of 3.79 million units. This is the lowest it has been since August 2010. Home resales, which are counted when a contract is finalized, were affected.
The drop in sales in October is likely due to contracts signed in the previous months when the average rate on a 30-year fixed-rate mortgage went up to levels not seen since the late 2000s. Experts had predicted that home sales would decrease to 3.9 million units.
The Northeast, West, and densely populated South experienced a decline in sales, but the Midwest remained unchanged. Compared to October of the previous year, home resales fell by 14.6%.
Lawrence Yun, the chief economist at NAR, explained that potential home buyers had a tough time due to a lack of available houses and the highest mortgage rates in a long time.
In October, the average rate on a 30-year fixed-rate mortgage was 7.31%, peaking at 7.79% in late October, the highest since November 2000. Although it has decreased slightly, the rate averaged 7.44% last week.
Last month, the number of homes available for sale was 1.15 million, a 5.7% decrease from the previous year. At the current sales rate, it would take 3.6 months to sell all the existing homes on the market, up from 3.3 months a year ago.
A healthy balance between supply and demand is considered a four to seven month supply. With the supply still limited, some areas saw multiple offers on homes, causing prices to go up. The median existing house price increased 3.4% from the previous year to $391,800, the highest for October.
Homes stayed on the market for an average of 23 days in October, up from 21 days the previous year. Sixty-six percent of homes sold in October were on the market for less than a month.
First-time buyers made up 28% of sales, the same as the previous year but lower than the 40% considered necessary for a strong housing market. All-cash sales accounted for 29% of transactions, up from 26% the previous year. Distressed sales, including foreclosures, represented only 2% of transactions, virtually unchanged from the previous year.