Sales of previously owned homes in the United States fell to their lowest level in more than 16 years in October, as mortgage rates above 7% and still-high house prices kept buyers on the sidelines.

The National Association of Realtors (NAR) said on Thursday that existing-home sales dropped 5.5% last month to a seasonally adjusted annual rate of 3.75 million units. That was the weakest reading since August 2010, when sales were still falling after the end of a homebuyer tax credit, and it came in below the 3.85 million pace economists polled by Reuters had expected. Sales were down 8.8% on a year earlier.

Mortgage rates above 7%

Borrowing costs are the main drag on the market. The 30-year fixed mortgage rate averaged 7.33% across October, according to Realtor.com's economics team, after climbing above 7% in late August and peaking near 7.40% in mid-October. Freddie Mac's weekly survey showed the rate easing to 7.11% in the week to 12 November, its fourth consecutive weekly fall, but that relief came too late to lift October's closings, which mostly reflect contracts signed in August and September.

NAR chief economist Lawrence Yun said homebuying had become difficult with mortgage rates at their highest levels since 2000, apart from a single month in 2023. As a result, he said, home sales fell to their lowest level since August 2010.

Prices stay high despite slow sales

Despite the slump in transactions, prices have barely budged. The median existing-home price was $416,700 in October, up 0.4% on a year earlier, according to the NAR. Total housing inventory rose 1.3% to 1.59 million units, but many owners with cheap pandemic-era mortgages remain unwilling to sell and take on a far higher rate, a lock-in effect that continues to squeeze supply.

Traders are pricing in a high chance of another interest-rate rise from the Federal Reserve at its December meeting, according to CME Group's FedWatch tool, which would keep borrowing costs elevated into the new year.