In a promising sign for the housing market, sales of existing single-family homes and condos rose nearly 3% higher than a year ago last October, marking the first annual increase in more than three years.
Sales during the month also climbed 3.4% from September. That rise, combined with a growing inventory of properties for sale, suggests that lingering high mortgage rates may become less of a deterrent to homebuyers, said Lawrence Yun, chief economist for the National Association of Realtors.
“Maybe we are turning the corner, maybe people are accepting the new normal” of higher rates, he said.
Mortgage rates were drifting down in August and September, when many October purchasers were negotiating their deals. But rates have since climbed back up; the average 30-year fixed-rate mortgage increased six weeks in a row to nearly 6.8%. The rate did drop slightly last week.
October's seasonally adjusted monthly sales volume of 3.96 million is still indicative of a slow market, Yun said, and barring unusually strong sales in the year’s final two months, it’s likely sales for 2024 will be the lowest in nearly three decades.
Prices also remain high, with the median existing-home sales price rising 4% in October from one year earlier to $407,200. It was the 16th straight month of year-over-year price increases.
Mortgage finance giant Fannie Mae downgraded its forecast of existing home sales in 2025 to a 4% annual increase. The company previously had forecast an 11% rise in sales next year based on the expectation mortgage rates would fall below 6%.
"We expect inventories of homes added to the market, and therefore sales of existing homes, to remain subdued through next year, as the higher mortgage rate environment is likely to strengthen the ongoing lock-in effect," Mark Palim, Fannie's chief economist, said in a statement. By lock-in effect, Palim was referring to the reluctance of some homeowners to sell their properties and give up their sub-3% mortgages.
The supply of existing single-family homes and condos was up more than 19% in October from a year ago, the NAR said, and rose 0.7% from one month earlier. The roughly 1.4 million homes on the market equates to a 4.2-month supply, compared to 3.6 months in October 2023.
The rise in mortgage rates in October is a sign of a strong economy, including how much businesses are hiring workers, according to Justin Benefield, academic director for Auburn University's Winchester Institute for Real Estate Development.
Existing home sales rose in all four major U.S. regions in October from the previous month. They were up 6.7% in the Midwest, 2.9% in the South, 2.2% in the Northeast and 1.3% in the West.
An indicator that the housing market remains far from the old “normal” is the median age of first-time homebuyers. The figure for 2024 is age 38, Yun said, citing an NAR survey of consumers, compared to 35 last year. Just 24% of sales in 2024 have been to first-time buyers, according to the survey, the lowest ever recorded.
“Clearly they are struggling in getting into the market,” he said.
Single-family home sales increased 3.5% in October to a seasonally adjusted annual rate of about 3.6 million. Condo and cooperative sales were up 2.7% to 380,000 units. On a year-to-year basis, single-family sales rose 4.1%, but condo sales declined 7.3%.