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Home Sales Fall Again But May Be Close to Bottom

Surging mortgage rates and lofty home prices are putting the hammer on home sales.
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Soaring mortgage rates and still-elevated home prices continue to put a damper on the housing market.

Existing-home sales slumped 5.9% in October from September, the ninth straight monthly decline, and were down a whopping 28.4% from a year earlier, according to the National Association of Realtors (NAR).

"More potential homebuyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher” from last year, said NAR Chief Economist Lawrence Yun.

The 30-year fixed-rate mortgage averaged 6.61% in the week ended Nov. 17, up from 3.1% a year ago.

The squeeze-out is especially intense for people who want high-end homes. "The impact is greater in expensive areas of the country and in markets that witnessed significant home price gains in recent years," Yun said.

Home Prices Are Falling

Meanwhile, home prices continue to slide, with the median price for existing-home sales totaling $379,100 in October, down 1.5% from $384,800 in September and 8.4% from a record high of $413,800 in June.

Still, the October price was up 6.6% from $355,700 a year earlier. The largest year-over-year price gains came in Milwaukee (34.5%), Miami (25.1%) and Kansas City, Mo. (21.4%).

Phoenix reported the highest increase in the share of homes that saw price reductions compared to last year (35.9 percentage points), followed by Austin (31.2 percentage points) and Las Vegas (24.4 percentage points).

Getting back to mortgage rates, the 6.6% average for the week ended Nov. 17 did represent a sharp drop from 7.08% a week earlier.

"Mortgage rates have come down since peaking [earlier this fall], so home sales may be close to reaching the bottom in the current housing cycle," Yun said.

House Are Becoming More Affordable

Affordability remains an issue. "The median income needed to buy a typical home has risen to $88,300, almost $40,000 more than it was prior to the start of the pandemic, back in 2019," Yun said.

If you’ve bought a home recently, you know what it’s like to meet your mortgage obligations. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $1,840 in the third quarter, NAR reported.

That represents a trivial rise from $1,837 in the second quarter. But the figure soared 50%, or $614, from $1,223 a year ago.

The burden is particularly severe for first-time buyers. For a typical starter home valued at $338,700 with a 10% down-payment loan, the monthly mortgage payment registered $1,808 in the third quarter.

That barely changed from $1,807 in the second quarter, but it constitutes an increase of 49%, or $598 from $1,210 a year ago.

First-time buyers typically spent 37.8% of their family income on mortgage payments, up from 36.8% in the second quarter. A mortgage is considered unaffordable if the monthly payment (principal and interest) amounts to more than 25% of the family's income.