Home sales fell for the ninth consecutive month in October, going down 5.9% from September and more than 28% from last year, according to a report released by the National Association of Realtors (NAR).
The study indicates the Federal Reserve's continued interest rate hikes, which make monthly mortgage payments unaffordable for homebuyers across the country, as responsible for the decline. According to NAR Chief Economist Lawrence Yun:
More potential homebuyers were excluded from qualifying for a mortgage in October as mortgage rates rose (...) The impact is greater in expensive areas of the country and in markets that witnessed significant home price increases in recent years.
First-time homebuyers are scared away
Yun also points out that rising mortgage interest rates and high prices have consecutively driven first-time homebuyers out of the market. This trend continued in October, as first-time homebuyers accounted for only 28% of sales.
The median home price was at $379,100. Meanwhile, total housing inventory remained lower than both a year ago and September.
However, not everything is bad. A new analysis from real estate firm Redfin shows that the 30-year fixed rate fell nearly half a percentage point during the week, which could reduce monthly mortgage payments for prospective buyers by more than $100.
Yun concluded that the drop in mortgage rate may mean that home sales could soon reach their lowest point:
These mortgage rates have fallen since peaking in mid-November, so home sales may be close to bottoming out in the current housing cycle.