Existing home sales in October fell to their lowest level in 16 years, according to data released by the National Association of Realtors. Sales dropped to an annual rate of 3.75 million units, representing an 8.8% decline compared to the same month one year earlier.
The current sales volume is the lowest recorded since 2010. Economists attribute the decline primarily to high mortgage rates. In October, the average rate for a 30-year fixed-rate mortgage reached 7.40%, a level not seen since 2023. Joel Berner, a senior economist at Realtor.com, described the data as a "punch in the gut," noting that while a slow month was anticipated, the extent of the drop was unexpected.
The increase in mortgage rates has been driven by higher inflation and rising bond yields. Additionally, the Federal Reserve raised its benchmark interest rate in September to increase borrowing costs. The Federal Reserve uses these measures to reduce economic activity and lower inflation.
The impact extends to real estate professionals, lenders, and the broader construction industry. A sales rate of 3.75 million units, the lowest since 2010, suggests a contraction in market activity. Because the Federal Reserve uses higher interest rates to cool the economy, this slowdown is a result of national monetary policy designed to combat inflation. Prospective buyers will likely notice continued high borrowing costs in their loan estimates and monthly housing bills as long as these rates persist.
What happens next depends on future Federal Reserve actions and market reactions to inflation data. Policymakers have signaled that another interest rate hike could be implemented in December, which could further increase the cost of mortgages and potentially continue the slowdown in sales. While mortgage rates have fluctuated slightly since the October peak, they remain higher than a year ago. The market will continue to monitor the central bank’s upcoming decisions to determine if further cooling is expected through the end of the year.