According to recent data from The National Association of Realtors (NAR), existing-home sales fell for the ninth straight month in October, falling 5.9%. On an annual basis, existing-home sales declined 28.4% from October 2021. The downward trend was widespread across the country, as home sales in all four major U.S. regions dipped monthly and yearly.
“More potential homebuyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher,” NAR Chief Economist Lawrence Yun remarked. “The impact is greater in expensive areas of the country and in markets that witnessed significant home price gains in recent years.”
“Inventory levels are still tight, which is why some homes for sale are still receiving multiple offers,” Yun added. “In October, 24% of homes received over the asking price. Conversely, homes sitting on the market for more than 120 days saw prices reduced by an average of 15.8%.”
Housing inventory remained relatively unchanged, falling only 0.8% over the last year. However, inventory has been low for some time, especially in the era after Covid. Currently, unsold housing units represent 3.3 months of supply at current sales levels, compared to 2.4 months in October 2021.
New Home Sales Increase
New-home sales increased 7.5% from September to October despite falling existing-home sales. On an annual basis, new-home sales only decreased by 5.8%, indicating significantly higher demand for newly constructed housing over existing properties. Despite solid demand for newly built homes, new housing starts declined 4.2% between September and October and 8.8% compared to October 2021.
Cooling Home Prices
After record-high home appreciation during the Covid pandemic, home prices are coming down. According to mortgage data firm Black Knight, home prices fell in July, August, and September by a combined 2.6%. However, NAR data shows that existing-home prices are still up annually, growing 6.6% between October 2021 and 2022 to reach $379,100.
Benefits of Buying a Home Right Now
Buying into today’s market is a challenge, which is why existing home sales have declined nearly 30% over the last year. High home prices and mortgage rates are keeping an increasing number of buyers out of the current market, but there are still some upsides to buying a home right now.
As of November 23, the average 30-year fixed-rate mortgage sits at 6.58%, more than double where it sat in November 2021. There is an opportunity for buyers to refinance at a later date if rates fall back down. There is less competition for homebuying now, which tilts favor towards buyers. Demand is falling, and prices are decreasing, so buyers can potentially bid for homes under the asking price.
Prospective homebuyers and investors should pay close attention to the market they intend to buy. Moody’s Analytics predicts home prices will fall 10% from their peak in the near future, but there will be wide variation in home price movement depending on the city. Before buying a home, buyers and investors should consider that certain markets are more advantageous than others.
Naples, FL, Boise, ID, Nashville, TN, and Grand Rapids, MI, could all experience a 20% or more decline in home prices. Meanwhile, other markets, like Montgomery, AL (-1.4%), Trenton, NJ (-2.7%), and Baltimore, MD (-3.2%), will hold relatively steady compared to other parts of the country.