U.S. Home Sales Fell for Ninth Straight Month in October

U.S. existing-home sales fell for a ninth straight month in October, the longest streak of declines on record, as the steepest mortgage rates in two decades and high home prices are keeping many buyers on the sidelines.

Sales of previously owned homes declined 5.9% in October from the prior month to a seasonally adjusted annual rate of 4.43 million, the weakest rate since May 2020, the National Association of Realtors said Friday. October sales fell 28.4% from a year earlier, the biggest annual decline since February 2008.

Home sales have been declining each month since February, the longest stretch since NAR began tracking this data in 1999. From their recent peak in January, existing-home sales have dropped about 32%.

The slowdown is due to a rapid increase in borrowing rates. The average rate on a 30-year fixed-rate mortgage began to climb rapidly in the first quarter and rose above 7% earlier this month. Mortgage rates eased this week but are still more than double where they stood a year ago.

That surge in borrowing costs has driven away potential home buyers and led many would-be sellers to stay put, keeping inventory for sale tight. First-time buyers who have stepped back from the market are now facing rising rents and high inflation that can make it more difficult to save for down payments.

This year’s drop in home sales marks one of the biggest impacts from the Federal Reserve’s aggressive interest-rate increases aimed at cooling the economy and bringing down high inflation. Home sales are highly interest-rate sensitive and fuel related economic activity such as spending on renovations, furniture and appliances.

The housing-market slowdown is expected to persist in 2023 because home-buying affordability is near its lowest level in decades. Home prices have continued to rise on an annual basis due to low supply, though the pace of home-price growth has slowed sharply.

October’s 6.6% median price increase from a year ago is the lowest since June 2020.

Some economists expect significant price declines next year. “We have a demand side that has evaporated so rapidly,” said Diane Swonk, chief economist at KPMG, who is forecasting home prices nationally to fall 20% by the end of 2023 compared with this year.

Anne and Charles Rudig decided last year to move from Connecticut to Florida for a lower cost of living, including lower taxes. They bought a house in Melrose, Fla., in December 2021, but didn’t move immediately because the house needed repairs.

They watched mortgage rates rise and worried they would miss out on selling their Connecticut home during the hot market. “We really felt like we were running a race,” Mrs. Rudig said.

After the Rudigs listed their house in September, it sat on the market for more than a month, but they ultimately sold it in October for $302,000, about 4.2% above the list price. “The relief is enormous,” Mrs. Rudig said.

This week saw a pickup in home-buying interest as some buyers rushed to take advantage of the sudden drop in borrowing rates, which Freddie Mac said fell to 6.61%. Mortgage applications for home purchases rose 4% on a seasonally adjusted basis in the week ended Nov. 11 from the prior week, according to the Mortgage Bankers Association.

But home purchases are unlikely to become affordable for many first-time buyers unless rates drop below 6%, Ms. Swonk said.

“I’m not overwhelmingly confident that we’re going to see a rapid turnaround in this market anytime soon,” she said.

The Fed is expected to continue raising rates. Inflation stayed high in October, the labor market remained tight and consumers continued to spend robustly at retailers—all signs the economy is still running too hot for the Fed’s comfort.

“The rising mortgage rate is consistent with falling home sales,” said Lawrence Yun, NAR’s chief economist.

Excluding the early months of the Covid-19 pandemic, October’s existing-home sales rate was the lowest since December 2011, Mr. Yun said.

Broader economic uncertainty has also made buyers more nervous about making home purchases, real-estate agents say.

Homes typically go under contract a month or two before the contract closes, so the October data largely reflect purchase decisions made in September and August.

Demand also typically slows in the winter compared with the spring and summer.

Nationally, there were 1.22 million homes for sale or under contract at the end of October, down 0.8% from both September 2022 and October 2021, NAR said.

“The people that are selling right now are people that, for whatever reason, have to sell,” said Jennifer Barnes, a real-estate broker in Chicago.

Existing-home sales fell the most month-over-month in the West, down 9.1%, and in the Northeast, down 6.6%.

Erika Delk and Daniel Duke started house hunting in Santa Barbara, Calif., in 2021, and struggled to compete against cash buyers.

“We probably saw about 100 homes in person,” said Ms. Delk, who is 30. “Homes were just going for ridiculous prices.”

The couple lowered their budget as mortgage rates started rising, but they benefited from less competition in the market, she said. They bought a four-bedroom home in October at its listing price and negotiated a credit from the seller to pay for some repairs.

“There was a lot of, ‘Should we be doing this? Would it be better to wait and see if rates come back down?’” Ms. Delk said. But “we want to be here for a while, and the market really only matters when you buy your home and when you sell your home.”

Home builders have pulled back from new construction and started cutting prices in response to lower demand.

“Finding buyers who are both motivated and qualified is the new game in town,” said Eric Lipar, chief executive of builder LGI Homes Inc., in an earnings call this month.

A measure of U.S. home-builder confidence fell for the 11th straight month in November to the lowest level since April 2020, the National Association of Home Builders said this week.

Housing starts, a measure of U.S. home-building, fell 4.2% in October from September, the Commerce Department said this week. Residential permits, which can be a bellwether for future home construction, fell 2.4%.

News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from NAR.