Existing-home sales sink to 16-year low as mortgage rates bite

Sales of previously owned U.S. homes fell to their lowest level in 16 years in October, as mortgage rates near their highest point since 2000 continued to price buyers out of a market already strained by elevated prices, the National Association of Realtors reported Thursday.

Existing-home sales dropped 5.5% from September to a seasonally adjusted annual rate of 3.75 million units, the trade group said, and were down 8.8% from a year earlier. That is the slowest sales pace since August 2010, when the housing market was still digging out from the financial crisis. The decline was steeper than the 3.5% drop economists had expected.

A weak report across the board

The retreat was broad-based. Single-family home sales fell 5.8% from September to an annual rate of 3.41 million, while condominium and co-op sales slipped 2.9% to 340,000. Every region of the country posted year-over-year declines, led by a 14.5% drop in the West and a 9.7% monthly decline there; the Northeast held up best, down just 4.1% from a year earlier.

• Median existing-home price: $416,700, up 0.4% from a year ago, the 40th straight month of annual price gains
• Unsold inventory: 1.59 million homes, a 5.1-month supply at the current sales pace, the highest since November 2015
• Typical time on market: 35 days, up from 33 in September
• First-time buyers: 29% of sales, down from 32% a year earlier; all-cash buyers: 29%, up from 27% in September

NAR's Housing Affordability Index fell to 100.7 from 107.3 a year earlier, with the sharpest erosion in the Northeast, where affordability worsened 8.7% year over year. The slowdown is not confined to resales. The most recent Census Bureau and HUD new-residential-sales report put new single-family home sales at a seasonally adjusted annual rate of 676,000 in September, down 5.3% from a year earlier, suggesting the rate-driven retreat is also weighing on new construction even as the resale market falls further and faster.

Rates are still the binding constraint

The culprit, by nearly every account, is the cost of borrowing. The average 30-year fixed mortgage rate climbed to roughly 7.3% to 7.4% in October, according to Freddie Mac's weekly rate survey, a level not reliably seen since a brief spike in 2023, before easing somewhat in recent weeks. Rates have been grinding higher for most of 2026 as inflation has stayed stubborn, a trend that accelerated after an earlier run-up in oil prices this year.

That backdrop has put the Federal Reserve in an unusual posture. After raising its benchmark rate in September to a range of 3.75% to 4%, the Federal Reserve held rates steady at its October 28 meeting by a 10-2 vote, with two officials dissenting in favor of an immediate increase. Policymakers have been openly split since: some regional Fed presidents have argued publicly this month that rates need to move higher still to bring inflation fully back to target, a stance that, if acted on in December, would likely keep mortgage rates elevated well into next year.

Agents, builders and buyers all feel the squeeze

The slowdown touches more than just prospective buyers. Real estate agents are closing fewer deals in a market where listings sit longer; homebuilders face softer demand for new construction even as existing supply tightens relative to its recent history; and sellers who locked in low rates years ago continue to stay put rather than trade up into a 7%-plus loan, a dynamic that has kept resale inventory thin despite the slump in sales. Mortgage lenders, title companies and moving-related businesses are also seeing thinner transaction volumes. For the roughly 88 million American homeowners who are not trying to move, the report is mostly academic, but for the millions of renters and first-time buyers hoping to get into the market, borrowing costs near a quarter-century high are the primary obstacle.

What economists and industry figures are saying

NAR chief economist Lawrence Yun tied the decline directly to financing costs while arguing the broader household picture remains stable.

"Home buying is difficult when mortgage rates have climbed to their highest levels since 2000," Yun said, adding that despite the pullback in transactions, the nation's homeowners are "largely in a comfortable financial position" and that distressed sales remain near historic lows at just 2% of all transactions.

Selma Hepp, chief economist at the real estate data firm Cotality, told HousingWire that affordability, not just the rate level itself, is the deeper issue. Mortgage rates above 7% have become "a psychological threshold for buyers," she said, and the "key question is not simply whether mortgage rates decline" but whether any decline is large enough to meaningfully restore purchasing power, given rising insurance, property-tax and utility costs layered on top. She expects sales activity to stay "relatively subdued" until that changes.

Sean Fergus of NewHomeSource and Zonda noted that the weakness captured in October data may understate the real-time pullback, since buyers who stepped back when rates hit 7.4% in mid-October will not show up as lost sales until contracts that fall through appear in November and December closing figures. "Rates have since eased," he said, "but buyers need to trust that relief will last" before they re-enter the market in force.

What's next

Most analysts expect little immediate improvement. NPR reported that the pullback already visible in October is likely to deepen in November and December closings, since those contracts were signed when rates were at or near their highest point of the year. Freddie Mac's survey has shown rates easing modestly since mid-October, but economists caution that a lasting recovery in sales volume would require a more durable decline, something the Fed's current, divided stance on further rate increases makes harder to count on. Hepp and others point to the spring 2027 selling season, traditionally the housing market's busiest stretch, as the next real test of whether buyers are willing to return at current borrowing costs, or whether the market settles into an extended stretch of historically low turnover.