U.S. existing home sales fall to lowest level in more than 13 years and prices accelerate

WASHINGTON, Nov 21 (Reuters) – U.S. existing home sales fell to their lowest level in more than 13 years in October, as the highest mortgage rates in two decades and a housing shortage pushed buyers to leave the market.

Tuesday’s report from the National Association of Realtors also showed that the median home price last month was the highest of any October. Barring a rebound in November and December, home resales this year are on track for their worst performance since 1992.

“The combination of high prices, high mortgage rates and millions of homeowners unwilling to move, given that they are stuck on low rates, has frozen the market,” said Robert Frick, a business economist at the Navy Federal Credit Union in Vienna, Virginia.

Existing home sales fell 4.1% last month to a seasonally adjusted annual rate of 3.79 million units, the lowest level since August 2010, when sales were down following expiration a government tax credit for home buyers.

Home resales are recorded at the closing of a contract. October’s sales likely reflect contracts signed in the previous two months, when the average rate on the popular 30-year fixed-rate mortgage jumped to levels last seen in late 2000.

Economists polled by Reuters had forecast home sales would fall to 3.90 million units. Sales fell in the densely populated Northeast, West and South. They remained unchanged in the Midwest, the most affordable region.

Home resales, which account for a large portion of U.S. home sales, plunged 14.6% year over year in October.

The rate on the popular 30-year fixed-rate mortgage averaged 7.31% during the last week of September, before peaking at 7.79% in late October, the highest level since November 2000, according to data from the mortgage financing agency Freddie Mac.

Although it has since retreated following this month’s data showing a cooling labor market and easing inflation, the rate reached a still-high average of 7.44% last week.

Minutes of the October 31-November 31 meeting of the Federal Reserve. A meeting published Tuesday showed that “a few participants observed that activity in the real estate sector had flattened in recent months, likely reflecting the effects of further increases in mortgage rates from already high levels.”

The housing market bore the brunt of the US central bank’s aggressive monetary policy tightening, with residential investment contracting for nine consecutive quarters, before rebounding in the third quarter, thanks to builders attempting to take advantage of the housing shortage.

Stocks on Wall Street were trading lower. The dollar appreciated against a basket of currencies. U.S. Treasury prices were mixed.

TIGHT SUPPLY

There were 1.15 million used homes on the market last month, down 5.7% from last year. Most homeowners have mortgage rates below 5%, making them reluctant to sell. Before the pandemic, there were nearly 2 million homes for sale.

Lawrence Yun, NAR’s chief economist, told reporters that real estate agents would discuss with their representatives in the U.S. Congress a government tax incentive for homeowners who have lived in their homes for a long time to encourage them to put their homes on the market. walk. .

Yun also noted that even if mortgage rates continue to fall, along with 10-year U.S. Treasury yields, affordability will remain a challenge in the absence of adequate supply. The lack of old houses stimulates the demand for new housing.

At the pace of October sales, it would take 3.6 months to exhaust the current inventory of existing homes, up from 3.3 months a year ago. A four to seven month supply is considered a healthy balance between supply and demand. There is a severe shortage of homes in the $100,000 to $250,000 price range.

Even as builders become more innovative in constructing new housing projects, they are constrained by higher borrowing costs.

With supply still limited, multiple offers were the norm in some areas, keeping house prices on an upward trend year over year. The median existing home price increased 3.4% from a year earlier to $391,800, the highest on record in October. About 28% of homes sold last month were above list price.

Properties generally stayed on the market for 23 days in October, compared to 21 days a year ago. Sixty-six percent of homes sold in October had been on the market for less than a month.

First-time buyers represent 28% of sales, like a year ago. That share is well below the 40% that economists and real estate agents say is needed for a robust housing market.

All-cash sales accounted for 29% of transactions compared to 26% a year ago. Distressed sales, including foreclosures, accounted for just 2% of transactions, virtually unchanged from the previous year.

“The chances of a substantial improvement in sales in the near term remain very low,” said Daniel Vielhaber, an economist at Nationwide in Columbus, Ohio. “Looking ahead to the first half of 2024, supply promises to remain a significant headwind as mortgage rates are expected to remain high.”

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