• US existing home sales fell 5.5% in October to an annualized 3.75 million units, below the 3.85 million consensus and down from a revised 3.97 million in September, according to the National Association of Realtors.
  • The median home price rose 0.4% year over year to $416,700, while housing inventory reached 1.59 million units, equivalent to 5.1 months of supply.
  • Housing demand weakened sharply even as prices remained elevated, highlighting continued pressure on the US housing market.

A Sharp Pullback in Sales

Existing home sales in the United States dropped 5.5% in October to a seasonally adjusted annual rate of 3.75 million, falling short of the 3.85 million consensus estimate, data from the National Association of Realtors showed. The decline follows a downwardly revised 3.97 million pace in September. The annualized figure represents the number of homes that would sell if the current pace continued for a year, not the total sold during the month.

The weak reading underscores the persistent chill in the housing market, where high mortgage rates and elevated prices continue to sideline would-be buyers. Even as sales slowed, the median existing-home price edged up 0.4% from a year earlier to $416,700, signaling that prices remain stubbornly high despite softer demand.

Inventory rose to 1.59 million units, representing 5.1 months of supply at the current sales pace. That is up from 4.8 months in September, when inventory stood at 1.60 million. The uptick in months’ supply despite a slight decrease in absolute inventory reflects slower absorption—homes are sitting on the market longer as buyers pull back.

Mortgage Rates Remain a Key Constraint

The housing market’s struggles are closely tied to financing costs. The average rate on a 30-year fixed mortgage was 7.18% in early November, down modestly from 7.24% a week earlier but well above the 6.22% seen a year ago, according to Freddie Mac (OTC:FMCC). Those elevated rates have crushed affordability and discouraged both buyers and sellers.

“The lock-in effect remains a significant drag,” said Lawrence Yun, NAR’s chief economist, in recent commentary. Many homeowners with low-rate mortgages are reluctant to sell and take on a new loan at a higher rate, keeping supply tight. But demand has also weakened, with pending home sales falling 7.3% month over month in September, according to the Richmond Fed.

Mortgage purchase applications were down 19% year over year in the week ending October 30, according to the Mortgage Bankers Association, pointing to continued weakness in the months ahead. Zillow (NASDAQ:Z) estimated that pending sales fell 16.8% annually in October, while Redfin (NASDAQ:RDFN)’s four-week measure through November 1 showed exceptionally weak activity.

Price Resilience and Buyer Leverage

While sales have slumped, prices have held up better than some expected. The 0.4% annual increase in the median price is a sharp slowdown from the double-digit gains seen during the pandemic boom, but it still marks a record high for October. The median is influenced by the mix of homes that sell, so it does not necessarily reflect uniform appreciation across all markets.

For buyers, the softer conditions may offer more negotiating room. “Sellers are increasingly offering concessions and price cuts,” Yun noted. Still, first-time buyers continue to face significant hurdles, with starter-home inventory remaining scarce. Distressed sales accounted for just 2% of transactions in September, indicating that the slowdown is not driven by forced selling.

The Federal Reserve’s aggressive rate hikes have played a central role. The central bank raised its policy rate by a quarter point in September to a range of 3.75%–4%, its first increase in three years, as it battles inflation. Mortgage rates, which track Treasury yields and inflation expectations, are unlikely to decline sharply without a sustained drop in inflation or a shift in Fed policy.

Outlook Clouded by Uncertainty

The coming months are unlikely to bring much relief. Economists at BMO Capital Markets (NYSE:BMO) expect elevated rates, rising prices and worsening affordability to keep housing subdued. “The recent decline in mortgage rates is a positive, but it’s not enough to meaningfully boost demand,” said Priscilla Thiagamoorthy, an economist at BMO.

The key question is whether weaker demand will eventually lead to meaningful price declines or simply fewer transactions. So far, prices have remained resilient, partly because lock-in has constrained supply. But if sales continue to fall, sellers may be forced to adjust expectations.

Geopolitical factors could also complicate the picture. The year’s increase in mortgage rates has been linked to inflation and Treasury-yield pressures associated with the U.S.–Israeli war with Iran, illustrating how global shocks can feed through to domestic housing costs.

Against that backdrop, the housing market remains in a holding pattern, with buyers and sellers both waiting for clarity on rates and the economy. For now, the October data confirm that the recovery is not yet at hand.