U.S. Oct. Existing Home Sales Fall to 7.09 Mln Rate (Update1)

Nov. 28 (Bloomberg) -- U.S. previously owned home sales fell a larger-than-expected 2.7 percent last month and the number of unsold homes rose to the highest since April 1986, evidence that rising mortgage rates and skyrocketing prices are putting buying out of reach for some.

Existing home sales fell to a 7.09 million annual rate, the slowest since March, from 7.29 million the previous month, the National Association of Realtors said today in Washington. The increase in the median price over the last 12 months was the biggest in 26 years.

Housing affordability, already at a 14-year low last quarter, will continue to drop in coming months as interest rates rise, depriving the economy of a source of strength, economists said. The average 30-year fixed mortgage rate rose above 6 percent in October for the first time in six months and has kept rising since.

``The peak in home sales activity is behind us,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland. ``So far, it's a gentle trek down.'' Housing ``will present a drag for the economy,'' DeKaser said.