Existing home sales plunged 8.8% year-over-year in October to reach an annualized pace of 3.75 million. The downturn was largely driven by 30-year fixed mortgage rates, which climbed to a 2023 high of 7.40% during the month. Although financing costs have eased slightly from that peak, they remain considerably higher than the previous year. Central bank officials have signaled that another benchmark rate hike could arrive in December to ensure inflation returns to target levels.
Key points
Federal Reserve interest rate hikes have increased borrowing costs to deliberately slow e…: Federal Reserve interest rate hikes have increased borrowing costs to deliberately slow economic activity.
The prolonged period of four-year housing market stagnation has shifted into a steep decl…: The prolonged period of four-year housing market stagnation has shifted into a steep decline.
Central bank policymakers may implement an additional rate increase during their December…: Central bank policymakers may implement an additional rate increase during their December meeting.
Sources checked by our analysis pipeline: 1
The housing market has finally broken out of the stagnant holding pattern it's been stuck in for more than four years – just not in the right direction.
Existing home sales in October fell to 3.75 million, making an 8.8% decline in sales from a year earlier, according to the National Association of Realtors. The last time sales were this low was 16 years ago.
"It was a punch in the gut," said Joel Berner, senior economist at Realtor.com. "We expected to see a soft month but not the softest month since 2010."
Expensive mortgages are a big factor
The drop is mainly due to high mortgage rates.
In October, the average rate for a 30-year fixed rate mortgage hit as high as 7.40%, the highest since 2023. Rates have gone down a bit since then, but are still well above where they were a year ago.
Higher inflation and bond yields have driven up mortgage rates, but some of this housing slowdown was by design.
The Federal Reserve raised its benchmark interest rate in September to increase the cost…
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