As inventory increases, existing home sales increased for the first time in more than three years. Following two years of declining home sales, the real estate market may be beginning to change. According to Lawrence Yun, the chief economist for the National Association of REALTORS®, the most recent housing indicators indicate that “the worst of the decline in home sales could be over.”
Yun points to a steadily rising housing inventory, which, after years of record-breaking low supply, eventually offers potential home buyers more choices. According to Yun, “additional job gains and continued financial growth appear assured, resulting in a rise in housing demand. “
A Positive Turnaround in Home Sales
In October, existing home sales, which account for completed transactions for single-family homes, townhomes, condos, and co-ops, increased by 3.4%, according to NAR’s report on Thursday. However, the most encouraging sign that a turnaround is occurring is that existing home sales are now up nearly 3% for the first time since July 2021.
Home sales increased in all four of the country’s main regions last October. According to NAR’s housing report, the Midwest saw the most significant increases, with sales up almost 7% monthly and home prices up 7% annually.
Here’s a regional breakdown of sales and pricing trends:
- Northeast: Sales rose 2.2% from September, with an annual rate of 470,000, nearly unchanged from October 2023. Median price: $472,900, up 7.6%.
- Midwest: Sales jumped 6.7% in October, reaching an annual rate of 950,000, a 1.1% increase year-over-year. Median price: $305,300, up 7.2%.
- South: October sales climbed 2.9% from September to an annual rate of 1.77 million, a 2.3% increase from one year earlier. Median price: $361,200, up 0.9%.
- West: Sales rose 1.3%, reaching an annual rate of 770,000—up 8.5% year-over-year. Median price: $627,700, up 4.4%.
As home prices continue to rise, homeowners can still expect to see rising equity. According to the recently released REALTORS® Confidence Index, a survey of about 1,500 real estate professionals based on their sales transactions in October, nearly 60% of real estate professionals report selling properties in less than a month.
Homeowners are seeing significant equity growth as home prices continue to climb. The median price for existing homes rose by 4% in October, reaching $407,200 compared to $391,600 a year ago.
Nearly 60% of properties sold within a month, and many listings still received multiple offers, according to NAR’s REALTORS® Confidence Index, based on feedback from 1,500 real estate professionals in October.
“The steady price gains reflect increasing homeowner wealth nationwide,” Yun notes. However, he adds that additional inventory and increased home construction activity could moderate price growth in 2025.
Rising home prices and elevated mortgage rates continue to pose challenges for first-time buyers, who accounted for only 27% of sales in October. Historically, this group has represented about 40% of the market.
“For first-time buyers, affordable financing is critical,” Yun says. While mortgage rates remain high, they are expected to stabilize. As of mid-November, the average 30-year fixed-rate mortgage was 6.78%, according to Freddie Mac. Yun predicts rates could drop to the low 6% range in 2025 and 2026, possibly even lower depending on economic conditions.
Freddie Mac reported that as of November 14, the 30-year fixed-rate mortgage had an average of 6.78%. In 2025 and 2026, Yun anticipates a average mortgage rate range, with potential even lower rates depending on economic conditions.
Is More Housing Inventory on the Way?
The housing market has seen a notable improvement in inventory, which was up 19% in October compared to the same period last year. This equates to a 4.2-month supply at the current sales pace, a significant improvement for a market often constrained by low supply in recent years.
Additional inventory gains may be on the horizon as home builders prepare to ramp up activity. Despite a 3% month-over-month dip in housing starts reported in October, builders are optimistic about increasing single-family home construction.
Carl Harris, chairman of the National Association of Home Builders, expects a more favorable regulatory environment in 2025 that could enable greater housing supply. Robert Dietz, NAHB’s chief economist, adds that anticipated interest rate cuts through 2025 could reduce construction costs and spur additional building activity.
New-home sales have accounted for a growing share of the market, with builders using incentives to attract buyers. A recent NAHB/Wells Fargo Housing Market Index survey revealed that 60% of builders are offering incentives like mortgage rate buy-downs, while nearly one-third of builders reduced home prices in November, with an average price cut of 5%.
