US home sales drop 8.8% to 3.75 million in October

Existing home sales in the United States fell to 3.75 million units in October, marking an 8.8% decline from the same month last year. According to the National Association of Realtors, this figure represents the lowest sales volume recorded in 16 years. The market has broken out of a stagnant holding pattern that lasted more than four years, though the direction of the shift was downward rather than upward.

Joel Berner, a senior economist at Realtor.com, described the October numbers as a punch in the gut. He noted that while the team expected a soft month, they did not anticipate it would be the softest since 2010. The primary driver of the drop was the cost of borrowing, specifically high mortgage rates. In October, the average rate for a 30-year fixed-rate mortgage reached 7.40%, the highest level since 2023.

Although rates have decreased slightly since October, they remain well above their levels from a year ago. Higher inflation and bond yields have contributed to these elevated rates, but the slowdown was also a deliberate policy outcome. The Federal Reserve raised its benchmark interest rate in September to increase the cost of borrowing. This move aimed to reduce economic activity, including home purchases, to help lower inflation.

Berner acknowledged that the Federal Reserve's continued rate-raising cycle might appear to kick the housing market while it is down. However, he stated that getting inflation under control remains the long-term goal. Policymakers at the Fed have signaled that another rate hike could occur in December. Such an action would likely further slow down the housing market as buyers face even higher borrowing costs.