Sales of previously owned homes fell 8.8% from a year earlier to a seasonally adjusted annual rate of 3.75 million, the weakest reading since 2010. The decline broke a four-year holding pattern in the housing market—but in the wrong direction.

"It was a punch in the gut," said Joel Berner, senior economist at Realtor.com. "We expected to see a soft month but not the softest month since 2010."

The primary culprit is the cost of borrowing. The average rate on a 30-year fixed-rate mortgage climbed as high as 7.40% in October, the highest since 2023. Rates have eased slightly since then but remain well above year-ago levels, pricing many first-time and moderate-income buyers out of the market.

Higher inflation and rising bond yields have pushed mortgage rates upward, but the slowdown is partly by design. The Federal Reserve raised its benchmark interest rate in September to make borrowing more expensive across the economy, including for home loans. Policymakers have signaled another increase could come in December.

"It might seem like kicking the housing market while it's down right now for the Fed to continue a rate raising cycle, but in the long run getting inflation under control is really the goal," Berner said.

The slump carries significant implications for local communities. Fewer sales mean less revenue for real estate agents, title companies, movers, and home-improvement contractors, and it leaves many families locked out of homeownership or stuck in homes they have outgrown. For renters hoping to buy, the combination of high prices and costly mortgages has erased much of the affordability they might have expected a year ago.

Economists caution that the Fed's fight against inflation may keep the housing market cool well into next year, even as policymakers aim to bring price pressures under control. For now, the market's four-year stagnation has given way to a sharper contraction—one that is likely to be felt in neighborhoods and household budgets across the country.