Existing home sales for October see small gains, but supply declines

An improvement in mortgage rates at the end of the summer boosted home sales, but this gain 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 number is based on home closings, so contracts will likely be signed in August and September. While contract signings will not be affected by the government shutdown that began in October, closures, especially those requiring flood insurance or government-backed rural home loans, may be affected.

During the contract signing period, the average interest rate on a 30-year fixed mortgage fell slightly and then rose again. The popular 30-year interest rate started in August at 6.63%, dropped steadily to 6.13% by mid-September, then returned to 6.37% by the end of the month, according to Mortgage News Daily. It now stands at 6.36%.

The inventory of homes for sale also decreased. After posting gains for most of this year, supply fell to 1.52 million units, down 0.7% from September, though still about 11% higher than a year earlier. 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, a 2.1% increase from October 2024 and the 28th straight month of annual gains.

“Looking ahead, home shoppers in today’s market face some benefits from lower mortgage rates and seasonally slower competition,” Danielle Hale, chief economist at Realtor.com, said in a statement. “At the same time, a lack of housing affordability remains a challenge that keeps home sales at a historically low level.”

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

First-time buyers are back in the market, accounting for 32% of sales, compared to 27% a year ago – but not all areas are created equal.

“First-time homebuyers face headwinds in the Northeast due to a lack of supply and in the West due to rising home prices,” said Lawrence Yun, chief economist at the brokerage. “First-time buyers performed better in the Midwest due to an abundant supply of affordable homes and in the South due to adequate inventory.”

Sales growth remains strongest at the higher end of the market. Homes priced over $1 million saw sales increase more than 16% over last year, and those priced between $750,000 and $1 million saw a 10% increase. Meanwhile, sales of homes priced between $100,000 and $250,000 rose just 1%, and homes priced under $100,000 saw sales decline nearly 3%.