Home sales could see their worst year in 30 years. As mortgage rates rose last month and inventories remained exceptionally low, sales fell in October, and prices continued to rise. According to a monthly study released Tuesday by the National Association of Realtors, this kept homebuyers out of the market.
Home sales remained at 13-year lows as bidders battled for the few available properties, driving up costs. Price increases, along with an average 30-year fixed-rate mortgage rate exceeding 8% in October, have resulted in the least affordable market in several decades.
Last month, the median price for existing homes, which include single-family homes, townhomes, condominiums, and co-ops, increased to $391,800. This was up 3.4% from a year earlier, marking the fourth month in a row of year-over-year price rises. It was the highest median price for the month of October on record. According to the NAR, prices increased in all four regions of the country: the Northeast, Midwest, South, and West.
Home sales challenges persist
Higher expenses to buy and finance a home pulled sales down to a seasonally adjusted annualized rate of 3.79 million, a 4.1% decrease from September and a 14.6% decrease from a year earlier, according to the data. This fell short of analysts’ projections of 3.9 million units sold every month. Home sales in the Northeast, South, and West fell from the previous month but were steady in the Midwest.
“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” said Lawrence Yun, NAR’s chief economist. “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.”
In October, 28% of homes sold went above the asking price, indicating a bidding war among potential buyers.
“There are lingering effects of multiple offers, with more people waiving home inspection and appraisal contingencies,” said Yun. “Given the lack of inventory, home sellers are in the driver’s seat; they like the offers that waive those contingencies.”
In October, 24% of house purchasers waived home inspections, up from 20% a year ago; 21% waived appraisal contingencies, up from 18% a year ago.
Home sales fell in lower-priced categories (under $750,000) due to a lack of availability, while sales increased in higher-priced categories with more inventory.
“Where there is more inventory, more sales can get done,” Yun went on to say.
Buyer trends in October 2023
At the end of October, there were 1.15 million properties for sale, a 1.8% increase from September. Prior to the pandemic, typical inventory levels were around 1.9 million, implying that there were around half as many homes for sale compared to pre-Covid.
In October, properties stayed on the market for an average of 23 days, up from 21 days in September 2023 and October 2022. More than half of the homes sold last month had been on the market for less than a month.
In October, first-time buyers accounted for 28% of all sales.
“First-time buyers are still not able to crack above 30% on a consistent basis,” said Yun.
In October, all-cash sales accounted for 29% of all transactions, unchanged from September but up from 26% in October 2022.
“The lack of inventory and higher interest rates are really hitting the home sales market,” said Yun. “Maybe in a couple of months, we will see some improvement in affordability.”