October existing home sales see small gain, but supply is dropping

The improvement in mortgage interest rates at the end of summer increased home sales, but this increase 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 annual basis, according to the National Association of Realtors. Sales increased by 1.7% year-on-year.

This count is based on home closings, so contracts will likely be signed in August and September. While contract signings are not affected by the government shutdown that began in October, closings that require flood insurance or government-backed rural home loans may be.

At the time the contract was signed, the average interest rate on a 30-year fixed mortgage dropped for a while but then rose again. The popular 30-year interest rate started at 6.63 percent in August, dropped steadily to 6.13 percent in mid-September, and then rose again to 6.37 percent by the end of the month. Mortgage News Daily. It currently stands at 6.36%.

There was also a decrease in home stocks for sale. After rising for most of this year, supply fell 0.7% from September to 1.52 million units; but still about 11% higher than a year ago. At the current sales pace, there is a 4.4 month supply, which is still considered weak.

That’s why prices are still rising. The median price of a home sold in October was $415,200, up 2.1% from October 2024, marking the 28th consecutive month of annual increases.

“Looking ahead, home shoppers in today’s market face some advantages due to falling mortgage rates and seasonally slowing competition,” Danielle Hale, chief economist at Realtor.com, said in a statement. “At the same time, the lack of housing affordability continues to pose a challenge to keep home sales at historically low levels.”

Homes are staying on the market longer, with an average of 34 days last month compared to 29 days last October.

First-time buyers returned to the market and represented 32% of sales; this rate was 27% a year ago; But not all regions are equal.

“First-time homebuyers face headwinds in the Northeast due to lack of supply and in the West due to high home prices,” said Lawrence Yun, chief economist at Realtors. “First-time buyers did better in the Midwest because of the abundance of affordable homes and in the South because there was adequate inventory.”

Sales growth continues to be strongest at the top end of the market. Sales of homes priced over $1 million were up more than 16% from a year ago; There was a 10% increase in prices between $750,000 and $1 million. Meanwhile, sales of homes priced between $100,000 and $250,000 increased by just 1%, while homes priced under $100,000 saw a nearly 3% decline in sales.