US Existing Home Sales Sees Largest Monthly Gain in Nearly 3 Years

A single-family home for sale in Los Angeles, Calif., on Sept. 22, 2022. Allison Dinner/Getty Images

A higher number of existing homes were sold last month after September’s mortgage rate decline triggered an interest in buying activity, according to a Nov. 15 report from real estate brokerage Redfin.

Existing home sales rose 1.6 percent month-over-month in October, the report said, which is the largest monthly gain since January 2022. On an annual basis, sales increased 1.7 percent, the first yearly gain since November 2021.

Overall home sales, including both existing and newly-built properties, rose on a monthly and annual basis. The increase in sales came despite the median home sales price rising 5.2 percent year-over-year in October to hit $435,313, the largest yearly gain in six months.

“Home sales jumped in October because mortgage rates had just hit the lowest level in two years, giving buyers more purchasing power,” the brokerage said. The average interest rate on a 30-year-fixed mortgage was at 6.08 percent for the week ending Sept. 26.

“Noticing that rates were falling, many Americans started touring homes and making offers in September, which is why pending home sales jumped that month. Many of those pending transactions were finalized in October, fueling last month’s rise in home sales.”

This increase in pending sales did not continue into October, Redfin noted.

Pending sales fell 1.1 percent last month. This happened because mortgage rates shot up in October, with the average rate on a 30-year fixed-rate mortgage hitting 6.72 percent by the end of the month.

Stayce Mayfield, a Redfin Premier real estate agent in St. Louis, pointed out that homebuyer activity slowed as rates went back up.

“Not all buyers who came off the sidelines actually locked in a rate, so now they’re saying, ‘Well wait, now I’m getting quoted 7% when I thought I was going to get 6%,’” Mayfield said. “Sellers are grappling with the same issue; those who locked in low rates during the pandemic and were considering selling and buying a new home are now wondering if they missed the boat.”

According to a Nov. 18 report by real estate marketplace Zillow, the decline in mortgage rates in September provided more opportunities for prospective buyers.

While a middle-income household could only afford just above 27 percent of homes for sale on the market, this was still the highest share since February last year, it noted.

“Buyers should expect more unpredictability ahead for mortgage rates. Zillow expects rates to move lower into next year, though expectations can quickly change with each economic data release. Whichever direction mortgage rates move, the path is likely to be bumpy.”

‘New Normal’

During a recent forum in Boston, Lawrence Yun, the chief economist at the National Association of Realtors (NAR), said that 2024 has been a “very difficult year” for the housing market on many fronts. For instance, the expected sales recovery after an “awful” 2023 never came, he said.

The economist noted that first-time home buyers are facing difficulties entering the market. Yun does not expect any large fall in mortgage rates during President-elect Donald Trump’s second term in office.

“Mortgage rates in his first term (at 4%) were the good old days. Are we going to go back to 4%? Per my forecast, unfortunately, we will not. It’s more likely that we’ll go back to 6%. That will be the new normal, bouncing around 5.5%-6.5%,” Yun said. “Today, we have a massive budget deficit at a time when we are not in an economic recession ... If the Trump administration can lay out a credible plan to reduce the budget deficit, then mortgage rates can move downward.”

He expects the U.S. Federal Reserve to implement six to eight more rate cuts, with four different rounds of rate reductions in 2025.

Amid high prices and interest rates, first-time homebuyers are facing difficulties buying affordable homes. A recently published NAR report found that the market share of such customers fell to a “historic low” of 24 percent this year, down from 32 percent in 2023.

NAR Deputy Chief Economist Jessica Lautz said the current housing market is split into two groups: struggling first-time buyers and current homeowners looking to buy properties with cash.

“As home buyers encounter an unaffordable housing market, many are choosing to double up as families,” Lautz said.