The US housing market experienced a boost in October, with sales of previously owned homes rising by 3.4% from September to an annualized rate of 3.96 million units, according to the National Association of Realtors (NAR).
This marks the first year-over-year increase in home sales in over three years, with sales up 2.9% compared to October 2022.
The uptick in sales is attributed to a drop in mortgage rates during late summer and early fall, when many contracts for October sales were signed. The average rate on a 30-year fixed mortgage fell from 6.6% in early August to 6.11% by mid-September, encouraging prospective buyers to act.
“The worst of the downturn in home sales could be over, with increasing inventory leading to more transactions,” said Lawrence Yun, NAR’s chief economist.
He added that steady job growth and economic expansion are likely to drive housing demand, but elevated mortgage rates remain a hurdle for first-time buyers.
Inventory at the end of October stood at 1.37 million units, up 19% compared to the same time last year. This represents a 4.2-month supply at the current sales pace, still below the 5- to 6-month supply considered balanced between buyers and sellers.
The median price of an existing home rose to $407,200 in October, a 4% increase from the previous year. This marks the 16th consecutive month of annual price increases. Higher-end homes saw more activity, while affordability challenges continued to constrain first-time buyers, who accounted for just 27% of sales—well below the historical norm of 40%.
“Tight supply continues to put upward pressure on prices,” Yun noted.
He also pointed out that inventory levels would need to rise by another 30% to return to pre-pandemic conditions.
The share of all-cash buyers decreased to 27%, down from 29% a year earlier, as lower mortgage rates made financing more attractive. A report from Redfin highlighted a surge in buyer interest post-election, with its demand index rising 17% year-over-year in mid-November.
“The burst of buyers and sellers jumping into the market is the result of pent-up demand,” said Chen Zhao, Redfin’s economic research lead.
However, Zhao cautioned that it remains unclear whether this represents a short-term reaction or the start of a more sustained recovery in sales.
Despite the October surge, existing home sales for 2023 are on track to reach their lowest annual total since 1995. The housing market has been in a slump since 2022, when mortgage rates began climbing from pandemic-era lows.
While the recent rate drop offered some relief, mortgage rates have since climbed again, reaching an average of 7.05% on a 30-year fixed mortgage in November. Yun expressed cautious optimism, suggesting that stabilizing rates could support further recovery in the housing market, even as challenges persist for affordability and inventory levels.
CNBC and New York Post contributed to this report.
