WASHINGTON, D.C.: Sales of previously owned US homes fell in October to their lowest level in more than 16 years, as rising mortgage rates stemming from the war with Iran depressed demand, even though the labor market remained stable.

Existing home sales tumbled 5.5% to a seasonally adjusted annual rate of 3.75 million units, the National Association of Realtors said on November 12. That was the lowest level since August 2010, when sales were declining as a homebuyers tax credit ended. The incentive was aimed at stimulating demand following the 2008 global financial crisis.

Economists had forecast home resales falling to a rate of 3.85 million units. Sales plunged 8.8% on a year-over-year basis in October. The drop in sales was across all price categories, including those priced $1 million and above, which had experienced strong growth in prior months.

The 30-year fixed mortgage rate jumped above 7% in late August, rising to 7.40% by mid-September, for a total of 142 basis points since the US and Israel attacked Iran at the end of February, data from mortgage finance agency Freddie Mac showed.

"Home buying is difficult when mortgage rates have climbed to their highest levels since 2000, aside from a single month in 2023," said Lawrence Yun, the NAR's chief economist.

Existing housing inventory increased 1.3% to 1.590 million units, the highest level since November 2019. At October's sales pace, it would take 5.1 months to exhaust the current inventory of existing homes, the most since November 2015. The median existing home price advanced 0.4% from a year ago to $421,900, the highest for any October.

First-time buyers accounted for 29% of sales, down from 32% a year ago. A 40% share in this category is needed for a robust housing market.

"With mortgage rates expected to remain above 7% through most of 2027, we expect home sales to remain below 4 million until late next year," said Nancy Vanden Houten, lead US economist at Oxford Economics.

The job market, by contrast, remains resilient. Initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 200,000 for the week ended November 7, the Labor Department said. Economists polled by Reuters had forecast 195,000 claims. Claims have stayed at or below 200,000 since mid-September.

"Firms are continuing to hold on to labor," said Olivia Cross, senior US economist at Pantheon Macroeconomics. "We expect layoffs to remain low through the fourth quarter, but then come under some pressure next year in response to the recent tightening of financial conditions and the growing use of AI by firms."

Some argue that a smaller workforce, due to retirements and the Trump administration's immigration crackdown, is the key driver of the historically low level of claims.

Though businesses have been hoarding workers, they have remained reluctant to increase headcount, with economists citing uncertainty from the US-Israeli war with Iran, now in its ninth month.

US central bank Governor Michael Barr warned on November 12 the nation should be prepared for "serious short-term disruptions" to the job market because of AI, which he said, depending on how fast it is deployed, could begin displacing workers at scale and widening inequality in favor of investors.

The Federal Reserve left its benchmark overnight interest rate in the 3.75%-4.00% range in October. Government data showed consumer prices increasing faster than expected in October.