Home Sales in October Plummet to 16-Year Low

U.S. existing-home sales fell 5.5% in October to a seasonally adjusted annual rate of 3.75 million, the slowest pace since August 2010 and well below the 3.85 million economists expected. The decline was the steepest since January and marked the third straight month under a 4 million annual pace, a level the market has hovered near since 2023 despite a historical average of roughly 5.2 million.

The central tension in the report is that sales collapsed while prices kept climbing. The median existing-home price rose 0.4% from a year ago to $414,900, an all-time high, with single-family homes reaching $421,900 and condos and co-ops at $365,100. That divergence means the market is not clearing through lower prices; it is clearing through fewer transactions. Buyers are retreating because the average 30-year fixed mortgage rate climbed from 6.86% in September to 7.33% in October, briefly touching 7.40% on October 8 before retreating slightly. Rates then jumped again after a hotter-than-expected inflation report, leaving the cost of borrowing near its highest since 2000 apart from a single month in 2023.

The timing matters because existing-home sales are recorded at closing, so October’s figures mostly reflect contracts signed in August and September, when rates moved decisively above 7%. Pending-home data from September had already signaled the drop, meaning the October number was a confirmation rather than a surprise. Regionally, the West led the monthly decline at 9.7%, followed by the South at 6.5% and the Midwest at 3.2%, while the Northeast held steady. Every region posted a year-over-year decline, with the West falling 14.5%.

Inventory tells a second, contradictory story. Listings rose 1.3% month over month and 4.6% year over year to 1.59 million units, a seven-year high equal to 5.1 months of supply, the highest in 11 years. More homes are for sale, yet fewer are selling, because sellers who locked in ultra-low mortgage rates years ago have little incentive to move and take on a 7% loan. First-time buyers fell from 31% of purchases in September to 29% in October, while cash purchases rose from 27% to 29%, suggesting the market is increasingly serving existing owners with accumulated equity rather than new entrants.

The affordability index dropped to 100.7 from 107.3 a year ago, with every region feeling the squeeze. The Northeast, already expensive and undersupplied, saw its affordability index fall 8.7%, followed by the Midwest at 7.2%, the South at 5.4%, and the West at 5.2%. Even the $1 million-and-up tier, previously resilient, recorded an annual sales decline.

NAR Chief Economist Lawrence Yun described the market as difficult for both buyers and sellers, while noting that 88 million homeowners remain financially comfortable because of accumulated housing wealth and that distressed sales remain at just 2% of transactions. Realtor.com Chief Economist Danielle Hale called the slump a "perfect storm" of abrupt rate increases and pre-election policy uncertainty, predicting low sales for the rest of 2026 but not a permanent new normal. Cotality Chief Economist Selma Hepp added that tariff-related construction costs and rising utility bills are compounding the pressure on household budgets.

The unresolved question is whether rates can fall far enough, fast enough, to unlock what Yun called sizable pent-up demand. With consistent job growth supporting incomes but borrowing costs suppressing purchases, the market appears caught between two forces: a large pool of potential buyers and sellers held back by financing math, and a price level that has not yet broken despite the weakest sales environment in sixteen years.