Existing Home Sales Fall Further, Still at Lowest Level Since 2010
Existing home sales fell further, remaining at their lowest level since 2010, as lack of inventory and high mortgage rates continued to impact sales. According to the data from the National Association of Realtors (NAR), existing home sales fell 4.1% from September to reach a seasonally adjusted annual rate of 3.79 million units. This figure came in lower than the expected 3.90 million. Existing home sales are down 14.6% compared to one year ago.
Existing homes have been experiencing a consistent downward trajectory over the past year and a half, with monthly sales declining 19 of the past 21 months.
"Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation," said NAR Chief Economist Lawrence Yun. "Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market." Read More
Background on Existing Home Sales
Existing home sales measures the monthly sales of previously owned single-family homes. It makes up a huge part of the residential real estate market, as 88% of homes purchased last year were previously-owned homes according to the National Association of Realtors. More importantly, there exists a strong correlation between purchases of existing homes and consumer spending. An increase in existing home sales can indirectly stimulate economic activity with increased consumer spending on new furnishings and appliances. Alternatively, a sustained drop in existing home sales often foreshadows a downturn in the economy.
Here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 was previously available in the St. Louis Fed's FRED repository and is now only available for the last twelve months.
Over this time frame, we clearly see the real estate bubble, which peaked in 2005 and then fell dramatically. Sales were volatile for the first year or so following the Great Recession with monthly sales as low as 3.45 million units to as high as 5.44 million units. We have seen that same volatility following the most recent recession, with sales ranging between 3.79 million units to 6.73 million units.