The sale of previously owned homes fell to an annualized rate of 3.79 million in October, marking a 13-year low, according to data released by the National Association of Realtors (NAR) on Tuesday.
Existing home sales, which fell 4.1 percent from September and 14.6 percent from last year, reached its lowest point since August 2010, the data showed.
“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, in a press release.
“Fortunately, mortgage rates have fallen for the third straight week, stirring up buying interest,” Yun added. “Though limited now, expect housing inventory to improve after this winter and heading into the spring. More inventory will result in more home sales.”
Housing inventory was up 1.8 percent from September but down 5.7 percent from last October, while the average for a 30-year fixed-rate mortgage fell to 7.44 percent last week but was still up 6.61 percent from last year, according to NAR.
Mortgage rates have also skyrocketed over the past two years, as the Federal Reserve has repeatedly raised interest rates in an effort to rein in inflation. While inflation has eased significantly since reaching a 40-year high last summer, it remains well above the Federal Reserve’s 2 percent target.
“The confluence of high prices, high interest rates, and stubbornly low inventory are flash frying home buying now,” said Jamie Cox, managing partner at Harris Financial Group, in a statement. “If rates fall next year, housing will snap back.”
After holding rates steady at its last two consecutive meetings, the Fed has sparked some optimism that it may be nearing an end to its rate hikes. Officials, however, have warned that the central bank could raise rates one more time before the end of the year.
Selma Hepp, chief economist at CoreLogic, said Tuesday that recent data suggests “there really is nowhere to go but up in 2024.”
“In addition to existing home sales, and with expected decline in interest rates, homebuilders will have more homes ready for purchase, which, working together, could drive overall home sales higher next year after lackluster 2023,” Hepp said in a statement.
Fed officials have also indicated the central bank could hold rates higher for longer, which could keep mortgage rates high as supply remains a significant roadblock, said Daniel Vielhaber, an economist with Nationwide Mutual Insurance Company.
“The combination of high mortgage rates and what should be slow job growth due to a mild economic downturn is expected to keep the market for existing homes stifled through much if not all of the first half of 2024,” Vielhaber said in a statement.