The supply of homes for sale has dropped to a record low amid the hot US housing market
The supply of homes for sale is falling while prices rise. AFP / Chris DELMAS

Sales of previously owned homes fell in September to the lowest level since 2010 as homebuyers were discouraged by high mortgage rates and rising prices.

Sales fell 2% from August to a seasonally adjusted annual rate of 3.96 million, the National Association of Realtors said in a statement Thursday. Sales dropped 15% year-over-year.

The medium price of an existing home rose 2.8% from September 2022 to $394,300. All five U.S. regions posted increases. At the same time, the inventory of units for sale dropped 8.1% year-over-year to 1.13 million.

"As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales," NAR Chief Economist Lawrence Yun said in the statement. "The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains."

The average 30-year fixed mortgage rate was at 7.57% in the week ended Oct. 12 from, the fifth consecutive increase, Freddie Mac said on Oct. 12. It's the highest level since December 2000. A year before, the rate was at 6.92%.

With high rates, many homeowners who have their mortgages locked into low rates avoid selling. That reduces the number of properties on the market and prices keep rising.

Mortgage rates are directly affected by Federal Reserve policy. The U.S. central bank maintained the rate in the range of 5.25% to 5.50% on Sept. 20, the highest level in 22 years, and some of its officials have publicly spoken in favor of an additional increase before the end of the year.

The next rate decision is scheduled for Nov. 1. Fed Chair Jerome Powell speaks about the outlook for the economy at noon EST Thursday.