With prices elevated, U.S. home sales plunge

STORY: A key index of the U.S. housing market plummeted as elevated home prices and soaring mortgage rates push potential homeowners onto the sidelines.

The National Association of Realtors on Friday said existing home sales dropped 5.9% last month.

These resales, which account for a big chunk of U.S. home sales, slumped 28.4% on a year-on-year basis in October.

Driving the drop: a thirty-year fixed mortgage rate now at a 20-year high, and a median existing house price that has gone up for 128 straight months - the longest streak on record.

Chicago realtor Sabrina Glover says the trends are locking many potential home buyers out of the market.

“I think at this point, we’re looking for that correction in the market and it’s happening. You know, with interest rates currently being at 7%, it really is a shock to some buyers."

Some experts warn that high prices and steep borrowing costs could linger.

“I think it’s going to go on for awhile.”

Daniel McMillen is a finance professor at the University of Illinois at Chicago. He says those looking to buy might consider saving a little longer, or putting in an offer for a cheaper home.

“So, it may mean that you have to wait a little bit longer than you would’ve before to buy a house and you might not be able to buy as much house as you had before, but it doesn’t mean that you’re never going to be able to buy.”

The U.S. Federal Reserve has been aggressively tightening monetary policy to curb decades-high inflation.

Until Fed policymakers see prices start to drop, interest rates are likely to remain high.

“The Fed is working really hard to bring down inflation. Once they bring down inflation, I think we’ll be back into this long run of growth that we were before.”

The share of all-cash sales rose two percentage points from a year ago, signaling it's those who need a mortgage who are holding back from buying.

The median existing house price increased 6.6% from a year earlier to just over $379,000 in October.