News Mortgage News Home Sales Slump in October, But Outlook Could Improve The market could recover or crash depending on the path of inflation By Diccon Hyatt Diccon Hyatt Diccon Hyatt has written hundreds of articles about how public policy and the economy intersect with personal finance, tracking all the latest dynamics affecting your money. Before joining The Balance, he covered business and community news for 17 years, including Princeton, New Jersey's high-tech Route 1 Corridor. learn about our editorial policies Updated on November 18, 2022 Fact checked by Taylor Tompkins Fact checked by Taylor Tompkins Twitter Website Taylor Tompkins has worked for more than a decade as a journalist covering business, finance, and the economy. She has logged thousands of hours interviewing experts, analyzing data, and writing articles to help readers understand economic forces. She joined The Balance in 2022 as its Economics Editor. learn about our editorial policies Photo: The Good Brigade / Getty Images It’s a pretty tough time to buy or sell a house. Will things get better from here on out, or are we at the beginning stages of a residential real estate crash? There’s now reason to believe either option is a possibility. Home sales fell 5.9% in October for the ninth month of declines, the National Association of Realtors said Friday. The decrease brought sales down to an annualized rate of 4.43 million, the worst since May 2020 and the lowest since 2011 if you don’t include the early months of the pandemic. The number of homes on the market fell too, reaching its lowest level since May. The continued slump came as no surprise, given that mortgage rates continued to surge last month, driving many would-be homebuyers from the market. Mortgage rates declined sharply this week, giving hope that sales could improve in the months ahead. However, some economists warn that the pandemic-era housing boom in which prices rise 42% is likely to come crashing down to earth, decimating prices. That’s bad news for homeowners, who have already seen their on-paper wealth drop an average of $30,000 over the past few months of modest home price decreases. “Collapse in prices is coming,” Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics, wrote in a commentary. “We think prices need to drop by about 20% from their spring peaks in order to reach a sustainable level.” The same factor that’s crushed home sales this year—mortgage rates—might be cause for a turnaround ahead. The average rate offered for a 30-year fixed mortgage got as high as 7.08%at the end of October, according to data from Freddie Mac, more than double from the 3.22% rate that prevailed at the beginning of the year. That’s made monthly payments unaffordable for many would-be buyers. But last week, rates fell to an average of 6.61%, chopping $95 off the monthly payment for a median-priced home. Mortgage rates have been on a wild ride, hitting record lows in 2021 only to reach multi-decade highs last month. Rates tend to track the direction of yields on 10-year treasury bonds, which typically rise along with inflation fears. This year’s roaring inflation, and the Federal Reserve’s campaign of rate hikes responding to it, have driven mortgage rates skyward. But recent indications of cooling prices have taken some of the pressure off. The downtick in rates caused a 4% bump in mortgage applications last week, according to the Mortgage Bankers Association. That’s “an encouraging sign that there is still a pool of buyers standing at the ready to buy a home at the first sign of lower mortgage rates,” economists at Wells Fargo Securities said in a commentary. Indeed, home sales may bottom out soon, NAR chief economist Lawrence Yun said in a commentary. And Pantheon, alongside predicting a price crash, forecast sales would find their floor early next year as long as mortgage rates don’t rise.However, as quickly as mortgage rates fell, they could shoot back up again, the Wells Fargo economists cautioned—it all depends on what happens with inflation. Have a question, comment, or story to share? You can reach Diccon at firstname.lastname@example.org. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. National Association of Realtors. "Existing-Home Sales Slumped 5.9% in October." Freddie Mac. "Mortgage Rates." Mortgage Bankers Association. "Mortgage Applications Increase in Latest MBA Weekly Survey."