Homes for sale with a “Sold” sign from a real estate company in North Patchogue, New York.
Steve Provost | Newsday | Getty Images
After a slow summer, a sharp drop in mortgage rates in October gave homebuyers pause.
Sales of previously owned homes increased 3.4% last month from September to a seasonally adjusted annualized sales volume of 3.96 million units, according to the National Association of Realtors. Sales were up 2.9% from last October, the first annual increase in more than three years.
The count is based on signed contracts, meaning the majority of deals were struck in August and September. During this period, the average interest rate on the popular 30-year fixed mortgage is falling. According to Mortgage News Daily, interest rates started around 6.6% in August and dropped to a low of 6.11% by mid-September.
“The worst of the home sales decline may be behind us, and increased inventory will lead to more transactions,” NAR Chief Economist Lawrence Yun said in a release. “Additional job growth and continued Economic growth appears to be guaranteed, leading to growing demand for housing. However, mortgage financing, while still high, is expected to stabilize for most first-time buyers.
As of the end of October, pending sales were 1.37 million units, an increase of 19.1% from October 2023. It’s still on the low side as the 6-month supply is considered balanced between buyers and sellers.
Tight supply continues to put upward pressure on prices. The median price of existing homes sold in October was $407,200, up 4% from a year earlier. In terms of price categories, the high-end market is more active than the low-end market.
“We still need 30% more inventory to get back to where we were before the COVID-19 outbreak,” Yun said.
The proportion of all-cash buyers fell back to 27% from 29% in October 2023.
First-time homebuyers accounted for 27% of sales, down from 28% last year and still at a historic low. They typically account for 40% of sales.
Mortgage rates are much higher today, with a 30-year fixed rate at 7.05%. However, a new report from Redfin shows a recent surge in the number of potential buyers contacting its agents, especially after the election. Its so-called demand index rose 17% annually in the week of mid-November, reaching its highest level since August 2023.
“The reason why buyers and sellers are flooding into the market is because people are waiting for the election to pass and the pent-up demand for a second interest rate cut from the Federal Reserve,” said Li Chen of the Redfin Economic Research Center. “Now we’re watching closely to see if this is a brief post-election boom or if it translates into a steady improvement in pending sales,”
