Mortgage Rates Fall After Home Sales Hit a 16-Year Low

October was a rough month for home shoppers. Existing-home sales dropped to their slowest pace in 16 years. Then, on the same Thursday the sales report came out, mortgage rates fell again. Those two headlines can sit side by side, but they are not a simple cause and effect. October’s home sales already closed when rates were higher. This week’s decline is relief arriving after a weak month, not the reason last month’s deals fell through.

The National Association of Realtors said Thursday that existing-home sales fell 5.5% in October to a seasonally adjusted annual rate of 3.75 million. That is the lowest pace since August 2010, and it is 8.8% below October of last year. The median sales price was $416,700, up just 0.4% from a year earlier. Inventory rose to 1.59 million homes, equal to a 5.1-month supply. Month-over-month sales declined in the West, the South, and the Midwest, and held steady in the Northeast. The sharpest drop was in the West, where sales fell 9.7%.

More listings can help if you are ready to buy. A 5.1-month supply is closer to a balanced market than the tighter conditions of recent years, and some sellers have now lived through a very slow month of closings. That does not make every home a bargain. It does mean you may have more room to talk about price, closing costs, or a rate buydown than you did when rates were at their October peak and buyers were scarce.

NAR’s report is about closings that already happened in October. Those buyers were shopping under higher mortgage rates. NAR noted that the average 30-year fixed rate was 7.33% in October, up from 6.86% in September. “Home buying is difficult when mortgage rates have climbed to their highest levels since 2000, aside from a single month in 2023. As a result, home sales fell to their lowest level since August 2010,” said NAR Chief Economist Lawrence Yun.

Later on Thursday, Freddie Mac released its weekly Primary Mortgage Market Survey®. The average 30-year fixed rate came in at 7.11%, down from 7.18% the week before. The 15-year fixed rate fell to 6.45% from 6.57%. A year ago, those averages were 6.24% and 5.49%. The 30-year is also 29 basis points below its 7.40% peak on October 8 and October 15.

That is useful news. It is just not the same news as the sales report. Think of it this way: October’s sales tell you what already closed when rates were at their fall high. This week’s survey tells you what new borrowers are being quoted now that rates have eased off that peak.

Why October’s Closings and This Week’s Rate Are Different Stories

A home sale in the NAR report is a closing, not a new offer. Many of those October deals were written weeks earlier, when the 30-year average was still near 7.3% or 7.4%. By the time Freddie Mac printed 7.11% on November 12, those closings were already in the books.

Yun also pointed to what could come next. “Based on the current underwhelming home sales pace at a time of consistent job growth, there could be sizable pent-up demand if mortgage rates decline.” That is the fair way to connect the two reports: last month was weak because borrowing costs were high, and a lower rate now may help some waiting buyers come back. It does not rewrite October’s results.

Affordability was already tight. NAR’s Housing Affordability Index stood at 100.7 in October, down from 107.3 a year earlier. First-time buyers accounted for 29% of sales, down from 31% in September. Cash buyers rose to 29%. Homes also sat a little longer, with a median of 35 days on the market.

What This Rate Drop Means for a Typical Payment

The weekly move is modest. The more useful comparison is the drop from October’s peak.

On a $416,700 loan — a balance that matches October’s median sales price — the principal-and-interest payment on a 30-year fixed loan is about $2,803 a month at 7.11%. That is roughly $20 less than last week’s 7.18%, and about $82 less than the 7.40% peak. Taxes, insurance, and other costs are not included.

The 15-year fixed rate, often used by borrowers who want to pay a home off sooner or who are refinancing, fell even more this week — 12 basis points, to 6.45%. On that same $416,700 loan, the 15-year principal-and-interest payment is about $3,618 a month at 6.45%, or roughly $28 less than last week’s 6.57%. The monthly bill is still higher than a 30-year loan, because you are paying the balance back faster.

Redfin saw a similar pattern in its weekly data for the four weeks ending November 8, when the 30-year average was still 7.18%. The typical monthly payment had already slipped to $2,755, the lowest in six weeks, and sale prices had fallen for a fourth straight week. Redfin also noted that daily rates have since ticked back up after a hot inflation report.

A year-ago comparison still stings. At last November’s 6.24% average, that same $416,700 loan would have a principal-and-interest payment of about $2,563 a month, or roughly $240 less than today’s 7.11%. The recent drop helps. It does not take shoppers back to last year’s costs.

Early Demand Picked Up Before This Week’s Survey

Some buyers were already responding as rates eased. The Mortgage Bankers Association said Wednesday that mortgage applications rose 6.2% in the week ending November 6. Purchase applications were up 8% after seasonal adjustment, and refinance applications rose 5%.

That survey closed before this week’s 7.11% print. MBA’s own 30-year average that week was 7.21%. Refinance activity was still 57% below the same week a year ago, and unadjusted purchase applications were 18% lower than last year. So demand improved as rates came down, but it has not snapped back to last year’s pace.

Daily Quotes Have Already Moved Higher

Here is the caution. Freddie Mac’s weekly number is an average of rates offered from the prior Thursday through Wednesday. It can lag what lenders are quoting today. Thursday’s 7.11% is a backward-looking average, not a promise of this afternoon’s rate sheet.

The 10-year Treasury yield, a key benchmark for mortgage rates, closed at 5.10% on November 12, according to the U.S. Treasury. That was up from 4.84% on November 5. Yahoo Finance, using Zillow data, put the average 30-year purchase rate at 7.14% on Friday, November 13, up 15 basis points from a week earlier.

Realtor.com warned that this stretch of relief may be short-lived after a hotter inflation report. If you like a quote you can afford, it may be wiser to lock it than to wait and hope the weekly average keeps sliding.

Should You Act on This Week’s Drop?

My take is that this is a better week than October, not a reason to stretch.

YES, it is worth a serious look if:

• You already have a payment in mind that still works at 7.11%, and at a slightly higher rate if quotes bounce.
• You plan to stay in the home for many years and can “date the rate and marry the house.”
• You want more negotiating room. Inventory is higher than a year ago, and some sellers have been waiting through a very slow month.

NO, you should wait or narrow your budget if:

• The only way the payment works is if rates keep falling from here.
• You are counting on a refinance later to make the house affordable. That may happen, but it is not a promise.
• A savings of about $80 a month from the October peak would not really change what you can buy.

The Bottom Line for Buyers This Week

Home sales hit a 16-year low in October because rates had climbed. Mortgage rates have since fallen to 7.11%, which trims a typical payment and may help some buyers come off the sidelines. That is real relief after a weak month. Just keep the two stories straight, get fresh quotes, and only write an offer on a home that still works if daily rates drift back up.