AMNA NAWAZ: Sales of existing homes in the U.S.

fell last month to their lowest level in more than 16 years.

That's according to a new report by the National Association of Realtors.

In October alone, sales dropped to 3.75 million homes.

That's an 8.8 percent drop compared with the same time last year.

Stephanie Sy has more on what's driving the decline.

STEPHANIE SY: Amna, high mortgage rates are a key part of all of this.

They haven't been this high in nearly a generation.

As of today, the average rate is 7 percent for a 30-year fixed mortgage.

And even though prices are dropping, in some markets, they're still unaffordable for a lot of folks.

We spoke to a handful of people either trying to buy or sell a home in this environment.

CHESTER CARL BOSTEK, Colorado: Chester Carl Bostek.

I am currently in Montrose, Colorado.

LESLIE SHIPMAN, New York: Leslie Shipman.

I live in Ridgewood, Queens, New York City.

CHRISTIAN LIEN, Iowa: Christian Lien, Des Moines, Iowa.

CHESTER CARL BOSTEK: I'm not trying to sell this home or want to sell it.

The reason is health-related.

Montrose is at an elevation of about 6,000 feet, and I have had pulmonary issues in the past, which have continued to get somewhat worse.

It's harder to breathe up here than it is at sea level.

So I want to relocate to sea level.

LESLIE SHIPMAN: Well, the truth is I don't want to leave New York.

I'd love to stay in New York.

I love this town, but my husband and I are solidly middle-class people who have been renting in this town for decades.

So what we have decided to do is to buy something so we don't spend our retirement moving from one apartment to another.

So we're going to take some of our savings to put aside for a down payment.

But we can't afford to do it in New York.

CHRISTIAN LIEN: Within months of us moving here, we kind of decided the neighborhood wasn't for us, but that was over five years ago.

LESLIE SHIPMAN: I'm looking at other medium to large mid-Atlantic and East Coast cities.

And I have a realtor and I have started the process, and I have identified some really great places to go that my husband and I can afford to buy something.

I think a lot of sellers are somewhat nervous about putting their places on the market right now.

It's a buyer's market because of interest rates.

So it's just a confusing time.

CHESTER CARL BOSTEK: Unfortunately the market is gone very badly.

Interest rates are up, I think 7.5 percent for new fixed 30-year mortgage.

That being the case, I haven't tried to sell yet.

I'm exploring the possibility of encouraging a VA eligible buyer to take over my VA loan, which is at 2.5 percent.

LESLIE SHIPMAN: Our biggest thing is trying to control what our monthly housing costs will be.

CHRISTIAN LIEN: What we got prequalified for plummeted, and so there just wasn't anything in terms of availability.

And plus, with the housing prices going up, that's -- again, so you're getting limited on what you can afford, and then the places that you want are going up.

I know our house here, I estimate it's increased in value based off of appraisal by about 40 to 50 percent since we purchased it.

So that's something that's helping and hurting at the exact same time.

CHESTER CARL BOSTEK: I'm hoping that the housing market will improve.

There's got to be some increase in income and relief from some of the affordability questions that have been facing us.

There needs to be relief from those factors that drove the election results.

LESLIE SHIPMAN: It's very important for us to have things in place for lower-middle-class working folks to have those programs in place.

But I do kind of feel like the middle class frequently is overlooked.

STEPHANIE SY: To make sense of what's happening in the housing market, I'm joined by Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors.

Jessica, welcome to the program.

You heard those voices.

They seem to be describing a broken housing market.

For some, it's getting harder to sell, but at the same time, it's still pretty hard to buy.

Is that a fair assessment?

JESSICA LAUTZ, Deputy Chief Economist and Vice President of Research, National Association of Realtors: It is.

For homebuyers today, especially first-time homebuyers who I believe were several of the voices that we heard, it is very difficult to be able to find and afford a home and save for a down payment with many other expenses that Americans have today.

STEPHANIE SY: How much is the supply part of this crunch driven by people still holding on to their homes because they bought them at those super low interest rates of 2 to 3 percent that we saw for years after the Great Recession versus a lack of inventory that can meet demand?

JESSICA LAUTZ: So it's both.

We know that we have been underbuilding homes since the Great Recession, and we know that builders have a lot of headwinds bringing in new properties into the market, whether it's labor, the cost to do so, the cost of land, regulations.

And so that's part of the problem.

But the other part of the problem is people holding on to their homes.

They have no motivation to move if they're in a low interest rate mortgage and they're looking at the future cost of a mortgage, the cost of homes.

And even though they could translate that with a lot of housing equity and a large down payment, many of them are unwilling or unable to make that move.

STEPHANIE SY: So you have this 16-year low in home sales.

Where are you hearing about serious drops in sales, and how concerned are you looking into this next year and probably not an improvement in interest rates at this point?

JESSICA LAUTZ: Right.

So we do expect that interest rates are going to stay about where they are right now, which is a headwind certainly for homebuyers.

And when we look at home sales activity, we can see that locally, especially in the West region, with the cost of homes what they are, it is very difficult for many people to make a move and to actually be able to find that new property.

So, certainly, the West is hard-hit.

If we look at the Midwest, there's slightly more housing affordability there, but it's not universal.

And frankly, if you have a household income of below $75,000 in most areas of the country, you're going to probably have a very hard time finding a property that you can afford.

STEPHANIE SY: At the same time, you have starter homes in a lot of cities in America right now that start at a million dollars, and you have people that are able to pay cash.

I mean, how does a first-time homebuyer even begin to compete with that?

JESSICA LAUTZ: Right.

And that's the crux of the issue is, when we look at the housing market today, we know we have a K-shaped economy, but, frankly, we have a K-shaped housing market.

We know that there's a lot of people who can make housing trades right now.

In fact, nearly one in three primary residents, repeat buyers who are out there are making all cash purchases.

They're taking money from their housing equity that they have earned, and they're also using financial assets.

They're combining those two and they're making an all-cash purchase.

And then you have competition from first-time homebuyers, who are desperately trying to enter into the market and are having a very difficult time being able to do so.

So it's a very divided housing market right now.

STEPHANIE SY: And when you talk about that K-shaped housing economy, you see that people that have wealth continue to grow that through their housing equity, and people that are renting continue to sort of lose out on that.

So that has ramifications, doesn't it, for the future.

JESSICA LAUTZ: It does.

We know that homeowners are continuing to build that wealth.

They're building generational wealth really through homeownership.

And we know the net worth of an owner is now nearly $460,000, while the net worth of a renter is just over $10,000.

And so that divide is continuing as mortgage holders pay down that mortgage, as their home continues to gain in value, and then renters are struggling to invest in the stock market, they're struggling to invest in real estate, certainly.

And so we can see that divide continuing to grow.

STEPHANIE SY: Are there any easy answers for what a first-term -- first-time homebuyer can do in this environment, Jessica?

JESSICA LAUTZ: Sure.

So we can learn from successful homebuyers this year.

When first-time homebuyers did purchase, they made a lot of sacrifices, whether that's sacrificing on cutting spending on luxury items, on goods, on taking a second job, but some of them even moved in with family, and that allowed them not to pay rent for a temporary time period, save for a down payment, get their financial house in order, looking outside that ideal area, taking advantage of government loans that are out there, so an FHA loan or a VA loan.

Those are the steps that successful homebuyers were able to take.

But important to keep in mind that first-time homebuyers today have higher incomes and they're wealthier than we have historically seen.

STEPHANIE SY: That is Jessica Lautz, economist with the National Association of Realtors, joining us.

Jessica, thank you.

JESSICA LAUTZ: Thank you so much for having me.