U.S. existing home sales at 13-year low in October…The cause is the influence of ‘this’.

Housing inventory down 5.7% from last year in October
Homeowners hesitant to sell due to high interest rates
Median price of existing homes in October highest ever for the month

Due to high interest rates and a shortage of supply leading to rising house prices, the number of existing home sales in the United States has fallen to its lowest level in 13 years, CNBC reported on November 21.

According to the National Association of Realtors (NAR), the number of existing home sales in the U.S. in October was 3.79 million, down 4.1% from the previous month. This is a 14.6% decrease from the same month last year, marking the lowest transaction volume since August 2010.

The decrease in supply in the real estate market, leading to a surge in house prices, also affected the decrease in transaction volume. As of the end of October, the number of houses listed for sale was 1.15 million, down 5.7% from the same month last year. This is about half the level before the COVID-19 pandemic. The NAR stated, “At the current sales rate, the October inventory corresponds to a 3.6-month supply.” The usual balance level between buyers and sellers is a six-month supply. Most homeowners are currently reluctant to list their homes for sale because they have secured a mortgage at an interest rate below 5%.

The median price of existing homes sold last month was $391,800, up 3.4% from the same period last year. This is the highest median price ever for October. Approximately 28% of all homes were sold at prices higher than the list price. The price increase has been expanding for four consecutive months. Reuters reported, “Excluding a rebound in November and December, this year’s existing home sales volume is expected to record the worst performance since 1992.”

Lawrence Yun, Chief Economist at NAR, explained, “Prospective homebuyers have once again had a tough time due to the persistent shortage of housing inventory and high interest rates.”

Robert Frick, an economist at Navy Federal Credit Union, also said, “The market has frozen due to a combination of various factors, including high inflation, high interest rates, low interest rates, and millions of homeowners who are hesitant to move.”

The shortage of supply is expected to be a major hurdle in the housing market as mortgage rates are expected to remain high in the first half of next year. Yun suggested, “Even if mortgage rates continue to fall along with the 10-year Treasury yield, homeownership will still be difficult without adequate supply.” He added, “Real estate agents will discuss tax incentives with U.S. Congress members and the government to encourage long-term homeowners to put their homes on the market.”

The average 30-year fixed mortgage rate in the U.S. exceeded 8% in the middle of last month for the first time in 23 years. Since then, rates have fallen slightly due to economic indicators showing a cooling labor market and easing inflation. According to Freddie Mac, a U.S. government-backed mortgage company, the 30-year mortgage rate was 7.44% as of the 16th.