In October, existing home sales climbed from a 14-year low, marking the first yearly increase in over three years. This rise happened as buyers took advantage of mortgage rates that briefly hit a two-year low at the end of September, as reported by the National Association of Realtors (NAR). While home prices remain high due to existing homeowners keeping their low-rate mortgages, we anticipate an uptick in sales as mortgage rates ease further with support from the Federal Reserve. Increased inventory is likely to help slow price growth and improve affordability.
Many homeowners with low mortgage rates are choosing not to sell and instead are holding onto their homes rather than switching to new mortgages with higher rates. This trend is pushing home prices up and limiting the available inventory. As the Federal Reserve begins reducing rates, expect mortgage rates to gradually decline, which should boost demand and unlock more homes for sale over the next few quarters. In October, total existing home sales, including single-family homes, townhomes, condominiums, and co-ops, rose 3.4% to a seasonally adjusted annual rate of 3.96 million. This figure is 2.9% higher than last year, ending a 38-month decline in year-over-year sales since July 2021.
The share of first-time buyers increased to 27% in October, up from 26% in September but down from 28% in October 2022.
The number of existing homes available for sale grew from 1.36 million in September to 1.37 million in October, representing a 19.1% increase from the previous year. At the current sales rate, there is a 4.2-month supply of unsold homes in October, a slight decrease from 4.3 months last month but up from 3.6 months a year ago. This inventory level remains low compared to a balanced market, highlighting the ongoing need for more home construction.
Homes averaged 29 days on the market in October, an increase from 28 days in September and 23 days in October 2022.
In October, cash sales accounted for 27% of transactions, down from 30% in September and 29% a year ago. Cash buyers are less impacted by interest rate changes.
The median sales price for all existing homes in October was $407,200, reflecting a 4.0% increase from last year, marking the 16th consecutive month of year-over-year price rises. The median price for condominiums and co-ops also rose by 1.6% from last year, reaching $360,300. Price growth is expected to slow as inventory levels increase.
All four regions in the U.S. saw gains in existing home sales in October, with increases ranging from 1.3% in the West to 6.7% in the Midwest. On a year-over-year basis, sales rose by 1.1%, 2.3%, and 8.5% in the Midwest, South, and West, respectively, while the Northeast remained unchanged.
The Pending Home Sales Index (PHSI), which predicts future sales based on signed contracts, increased from 70.6 to 75.8 in September, thanks to better inventory and lower mortgage rates in the late summer. Compared to last year, pending sales are 2.6% higher, according to NAR data.