Sales of existing homes fell in October for the ninth straight month, down 5.9% from a month earlier as buyers faced mortgage rates that have doubled in the past year, the National Association of Realtors said on Friday.
Sales, at an annual pace of 4.43 million, are now 28.4% below a year ago. The median price, however, is still 6.6% from its 2021 level.
“More potential homebuyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher,” said NAR Chief Economist Lawrence Yun. “The impact is greater in expensive areas of the country and in markets that witnessed significant home price gains in recent years.”
The report follows Thursday’s news that new home construction fell again in October, with new starts down 4.2% and permits for new homes down 2.4% from September.
Housing is one sector of the economy that has shown the largest slowdown from the Federal Reserve’s aggressive campaign to curb inflation through higher interest rates.
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“The Fed is prescribing a recession,” said David Waddell, CEO and chief investment strategist of Waddell & Associates, a financial advisory firm in Memphis.
In recent days, various Fed officials have emphasized that while the central bank may reduce the size of its interest rate hikes next month and beyond, it is far from finished hiking borrowing costs to a “restrictive” level. Even though some measures of inflation have eased in recent months, the Fed needs to make sure all vestiges of inflation are on the run.
Some of the Fed members who vote on its monetary policy committee have suggested rates could go up by less than the 75 basis points of the past four meetings, but others have been more hawkish, stressing that while increases could be smaller they could continue longer. That has left markets whipsawed.
There was a dip in mortgage rates earlier this week, following better-than-expected inflation news and a drop in bond yields, but it is not yet clear that will continue.
“For many, the week-to-week volatility in mortgage rates alone, which in 2022 has been three times what is typical, may be a good reason to wait,” Danielle Hale, chief economist at Realtor.com, said ahead of the report. “With week-to-week changes in mortgage rates causing $100+ swings in monthly housing costs for a median-priced home, it’s tough to know how to set and stick to a budget. If so, home sales are likely to remain at lower levels, and we’ll see home price deceleration in the months ahead.”
Also Friday, the Conference Board’s index of leading indicators fell 0.8% in October to 114.9, following a 0.5% decline in September.
“The US LEI fell for an eighth consecutive month, suggesting the economy is possibly in a recession,” said Ataman Ozyildirim, senior director, economics, at the business organization. “The downturn in the LEI reflects consumers’ worsening outlook amid high inflation and rising interest rates, as well as declining prospects for housing construction and manufacturing.”
“The Conference Board forecasts real GDP growth will be 1.8 percent year-over-year in 2022, and a recession is likely to start around year end and last through mid-2023,” he added.