Sales of previously occupied US homes slumped in October to the slowest pace in more than 13 years, as surging mortgage rates and rising prices kept many prospective homebuyers on the sidelines. Existing home sales fell 4.1% last month from September to a seasonally adjusted annual rate of 3.79 million, the National Association of Realtors said Tuesday. That's weaker than the 3.9 million sales economists were expecting, according to FactSet. The last time sales slumped this hard was in August 2010, the AP reports, when the housing market was in recovery from a severe crash.
Sales sank 14.6% compared with the same month last year. They have fallen five months in a row, held back by climbing mortgage rates and a thin supply of properties on the market. Despite the decline in sales, home prices keep climbing compared with this time last year. The national median sales price rose 3.4% from October last year to $391,800. "Lack of inventory along with higher mortgage rates are really hindering home sales," said Lawrence Yun, the NAR's chief economist. The weekly average rate on a 30-year mortgage hovered above 7% in September, when many sales that were finalized in October would have gone under contract.
It has remained above that threshold since, surging in late October to 7.79%, the highest average on record since late 2000, according to mortgage buyer Freddie Mac. Last week, the rate averaged 7.44%. High rates can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already out of reach for many Americans. They also discourage homeowners who locked in far lower rates two years ago, when they were around 3%, from selling. Yun is forecasting that the average rate on the 30-year home loan will dip below 7%, perhaps to 6.5%, by spring, per the AP. "Maybe we will begin to see some turnaround in affordability, but we still need inventory," Yun said.
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