Home Sales Soar 3.4%! Is the Market Turning Around?

In a significant development for the U.S. housing market, sales of existing homes rose by 3.4% in October 2024 compared to September, reaching a seasonally adjusted annual rate of 3.96 million units, as reported by the National Association of Realtors (NAR) on Thursday. This marks the first annual increase in over three years, aligning with the sales pace last seen in July 2024.

The October sales rate exceeded economists' projections of 3.93 million units, according to FactSet, and represented a 2.9% year-over-year improvement—the first such gain since July 2021. The performance suggests potential recovery within a market long constrained by elevated mortgage rates and limited inventory.

One contributing factor to the uptick in sales is the rise in available inventory. The market had 1.37 million unsold homes at the end of October, up 0.7% from September and a notable 19.1% increase year-over-year. This accounts for a 4.2-month supply at the current sales pace—though still below the balanced market range of 5 to 6 months—as opposed to 3.6 months a year ago.

Moreover, homes typically stayed on the market for an average of 29 days in October, slightly longer than 28 days in September and 23 days during the same period last year. While inventory is growing, Lawrence Yun, NAR's chief economist, emphasized that it remains significantly below pre-pandemic levels. In October 2019, for instance, 1.8 million homes were on the market. “We still need another 30% growth in inventory to return to pre-COVID conditions,” Yun noted.

The national median sales price for existing homes increased for the 16th consecutive month, climbing 4% year-over-year to $407,200—a clear indication that tight inventory continues to fuel price appreciation. This upward pressure on prices has created affordability barriers, particularly for first-time buyers, who comprised just 27% of transactions in October. This is down from 28% a year earlier and remains far below the historical average of 40%.

Yun also highlighted the imbalance in inventory, particularly in more affordable price ranges. “Limited options in entry-level categories continue to hinder first-time buyer participation,” he said.

Additionally, the median age of homebuyers is rising as affordability remains an issue. The median age of buyers between July 2023 and June 2024 climbed to 56 years—the highest on record dating back to 1981. For first-time buyers specifically, the median age increased to 38, reflecting extended timelines to save for down payments and navigate higher home prices.

October’s performance comes against a backdrop of fluctuating mortgage rates. While the average 30-year mortgage rate fell to 6.08% in September, likely aiding contracts finalized in October, it has since climbed to 6.84% as of late November. Analysts predict that rates will remain volatile but are expected to stabilize around 6% in 2025.

For many existing homeowners, current market conditions provide little incentive to sell. Over 80% of homeowners with a mortgage have an interest rate below 6%, according to Realtor.com, making refinancing or upsizing less appealing. This dynamic continues to constrain overall inventory growth.

Despite October's positive data points, the 2024 housing market is still on track for its lowest annual sales since 1995, reflecting the long-term effects of elevated mortgage rates, which peaked at nearly 8% last year, and affordability struggles.

October’s rebound in existing home sales could indicate the beginning of a market stabilization phase, fueled by easing mortgage rate trends and incremental inventory gains. However, significant challenges remain, including affordability concerns for first-time buyers and persistently low home availability in key market segments. As the year nears its conclusion, the housing market remains one to watch, with broader economic conditions, interest rate movements, and policy changes likely shaping its trajectory in 2025.