Improvement in mortgage rates at the end of the summer boosted home sales, but that gain may be short-lived.
Sales of previously owned homes in October rose 1.2% from September to 4.1 million units on a seasonally adjusted, annualized basis, according to the National Association of Realtors. Sales were up 1.7% year over year.
This count is based on home closings, so contracts likely signed in August and September. While contract signings would not be impacted by the government shutdown that started in October, closings, especially those requiring flood insurance or government-backed rural home loans, could be.
During that contract-signing period, the average rate on the 30-year fixed mortgage came down for a bit but then moved up again. The popular 30-year rate started August at 6.63%, fell steadily to 6.13% by mid-September, and then came back up to 6.37% by the end of the month, according to Mortgage News Daily. It now stands at 6.36%.
The inventory of homes for sale has also come down. After gaining for much of this year, supply fell to 1.52 million units, down 0.7% from September, although still nearly 11% higher than a year earlier. At the current sales pace, there is a 4.4-month supply, still considered lean.
And that’s why prices are still gaining. The median price of a home sold in October was $415,200, an increase of 2.1% from October 2024 and the 28th consecutive month of annual gains.
“Looking ahead, home shoppers in today’s market face some advantages from falling mortgage rates and seasonally slower competition,” said Danielle Hale, chief economist at Realtor.com, in a release. “At the same time, a lack of housing affordability continues to be a challenge keeping home sales in their historically low level.”
Homes are staying on the market longer, at an average of 34 days last month compared with 29 days last October.
First-time buyers made a comeback in the market, representing 32% of sales, up from 27% a year ago — but not all regions are equal.
“First-time homebuyers are facing headwinds in the Northeast due to a lack of supply and in the West because of high home prices,” said Lawrence Yun, chief economist for the Realtors. “First-time buyers fared better in the Midwest because of the plentiful supply of affordable houses and in the South because there is sufficient inventory.”
Sales growth continues to be strongest on the high end of the market. Homes priced above $1 million saw sales up more than 16% from a year ago, and those priced between $750,000 and $1 million saw a gain of 10%. Meanwhile sales of homes priced between $100,000 and $250,000 were up just about 1%, and homes priced below $100,000 saw a drop in sales of nearly 3%.
