Existing home sales haven’t been this slow since 2010 

There's no sugar-coating it: The latest housing market data confirms that October was an ugly month for home sales.

Existing home sales drop to levels not seen in 16 years

Existing home sales came in at an annualized rate of 3.75 million last month, according to new data from the National Association of Realtors. That's down 5.5% from September and down 8.8% year-over-year, putting the October level at the lowest recorded since August 2010, when the housing market was digging out of a historic recession.

A perfect — or not-so-perfect — mix of ingredients has led to the slowdown, said Danielle Hale, chief economist at Realtor.com. Along with the sharp rise in mortgage rates seen in recent months, home sales typically slow around a U.S. election cycle, which adds to the seasonal downward shift usually seen ahead of the fall and winter holidays.

"While they won't last long-term, these challenges are likely to keep home sales near long-time lows for the next few months," Hale said.

Perhaps the one bit of good news that could be gleaned from NAR's Nov. 12 report is that pent-up demand is building. Existing home sales are now at a level last seen when there were around 30 million fewer people in the U.S. That, along with the solid job growth seen in the federal government's latest batch of labor market data, means a surge in demand may come if mortgage rates decline, said Lawrence Yun, chief economist at NAR.

Inventory rises, but data is mixed on home price behavior

While inventory of existing homes is climbing, NAR's report shows home prices are still rising. The trade association estimates that the total inventory was at 1.59 million units in October, up 4.6% from a year earlier, with the nation's supply of unsold inventory at 5.1 months, the highest level since November 2015.

Meanwhile, the median home price came in at $416,700, up 0.4% from a year ago and the 40th consecutive month of year-over-year increases. Other reports, however, are indicating that home prices are declining, albeit slightly. Redfin, which uses a four-week rolling average, estimates that the median home sale price has fallen 0.9% year-over-year.

Any inventory growth is expected to come from homes sitting on the market longer rather than from an uptick in new listings. "We don't expect a surge in supply from here as high mortgage rates are also sending sellers to the sidelines," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.

Dip in mortgage rates may be short-lived

Freddie Mac's weekly survey indicates that the 30-year mortgage rate fell for the fourth consecutive week, though economic volatility may put an end to that streak. The 30-year average was 7.11% as of Nov. 12, the lowest weekly level recorded in nearly two months.

But tech stock fluctuations and the ongoing U.S.-Iran war are both factors that are pushing rates higher. Mortgage News Daily, which uses a different set of metrics than Freddie Mac to determine rates, pegged the 30-year rate at 7.42% on Thursday, up significantly from earlier in the week.

And after a Nov. 10 report showed inflation is rising higher than expected while the job market remains solid, belief that the Federal Reserve will aggressively raise short-term interest rates has grown. That expectation should keep 30-year rates in the 7% range into 2027.

While these predictions present short-term problems for homebuyers, inflation is the longer-term issue, said Jiayi Xu, senior economist at Realtor.com. "Even if rates ease, living costs rising faster than pay will keep weighing on demand for years," Xu said.

Mortgage applications rise

Overall mortgage activity rose 6.2% this week in a sign that even small mortgage rate dips can impact home sales activity, according to the Mortgage Bankers Association (MBA). The unadjusted purchase index for home purchases rose 4% week-over-week for the week ending Nov. 6 but was still 18% lower than a year ago. The unadjusted refinance index was similarly up 5% week-over-week but down 57% year-over-year.

Meanwhile, the rate for 30-year FHA loans fell below 7%, which helped some first-time buyers get into the market, according to Joel Kan, VP and deputy chief economist at the MBA. 

It's a buyers market in nearly all major metros

The pullback of potential buyers remains stronger than the wave of sellers heading to the sidelines, with Redfin estimating in a Nov. 12 report that only three of the top 50 metros — Nassau County, New York; Newark, New Jersey, and Montgomery County, Pennsylvania — currently qualify as sellers markets.

If buyers can overcome the challenges posed by elevated mortgage rates, they will have more negotiating power than at any point in Redfin's records dating back to 2013, the report indicates. "Sellers are increasingly competing for buyers' attention, which can translate into price reductions, concessions and other savings," said Asad Khan, senior economist at Redfin.