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WASHINGTON—Sales of previously owned U.S. homes edged up in October, but fell on an annual basis, signaling continued weakness in the housing market.
Existing-home sales rose 1.4% in October from the previous month to a seasonally adjusted annual rate of 5.22 million, the National Association of Realtors said Wednesday. Economists surveyed by The Wall Street Journal had expected sales to notch a 5.19 million annual rate last month.
Compared with a year earlier, sales in October declined 5.1%, the largest drop since 2014.
Lawrence Yun, the trade group’s chief economist, said the annual decline signals softness in the housing sector.
“There is some feeling that the market could actually go even lower than what it is now in terms of sales,” Mr. Yun said.
A set of conditions have converged to impede home buying this year. For one, a shortage of available homes has fed a rapid run-up in home prices, creating an affordability crunch. While price growth has slowed some, it appears to in part reflect weakening demand, as inventory has built up in recent months.
Meanwhile, mortgage rates have risen in the past year and appear to be nearing 5%, a level analysts say could also deter many would-be buyers. Many current homeowners are unwilling to sell, too, because such a move would mean foregoing their low interest rates.
The average interest rate on a 30-year fixed-rate mortgage in October was 4.83%, up from 4.03% in January, according to Freddie Mac.
The median sale price for an existing home in October was $255,400, up 3.8% from a year earlier. There was a 4.3-months’ supply of homes on the market at the end of October, based on the current sales pace.
The tax bill passed late last year also lowered incentives for homeownership, particularly in pricey coastal markets and high-tax regions, by reducing the cap for the deductibility of mortgage interest and limiting the amount of state and local taxes that can be deducted.
Purchases of previously owned homes account for the bulk of U.S. homebuying activity. The Commerce Department releases data on October new-home sales next Wednesday.
Home construction is weakening some, too. Starts fell in October for single-family construction, and permits, which can signal how much construction is planned, dropped 0.6% from September to an annual pace of 1.263 million last month.
Builders are taking a cautious stance given the Federal Reserve’s plan to continue gradually raising interest rates, the National Association of Home Builders said Monday. The trade group’s gauge of U.S. home-builder confidence fell sharply in November, dragged down by heightened concerns about affordability in the housing market.
Mr. Yun said higher interest rates appear to be choking off buyer demand, and said the Fed should consider pausing its rate increases to give the housing sector time “to be on firmer ground.”
News Corp., owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.
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