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The real estate market may be showing signs of a shift following two years of falling home sales. National Association of REALTORS® Chief Economist Lawrence Yun believes the latest housing indicators show “the worst of the downturn in home sales could be over.”
Yun points to gradually rising housing inventory, which is finally giving prospective home buyers more options to choose from after years of record low supply. “Additional job gains and continued economic growth appear assured, resulting in growing housing demand,” Yun adds.
Existing-home sales, which account for completed transactions for single-family homes, townhomes, condos and co-ops, rose 3.4% in October compared to September, NAR reported Thursday. But possibly the most hopeful indicator that a turnaround is taking shape: Existing-home sales are now up nearly 3% year over year—the first annual gain since July 2021.
Home sales rose in all four major regions of the U.S. last month. The largest increases were recorded in the Midwest, where sales were up nearly 7% month over month and home prices were up 7% annually, NAR’s housing report shows.
Homeowners also continue to see rising equity, as home prices continue to climb. Nearly 60% of real estate professionals report selling properties in less than a month, and many homes listed are still receiving multiple offers, according to the newly released REALTORS® Confidence Index, a survey of about 1,500 real estate professionals based on their October sales transactions.
Existing-home prices for all housing types rose 4% in October, reaching a median of $407,200 compared to last year’s $391,600 median. “The ongoing price gains mean increasing wealth for homeowners nationwide,” Yun says. “Additional inventory and more home building activity will help price increases moderate next year.”
That could help improve affordability for home buyers who are stretching their budgets to afford homeownership. First-time home buyers have been hit particularly hard by rising costs: They comprised just 27% of sales in October. Historically, first-time buyers tend to comprise 40% of market share. “For most first-time home buyers, mortgage financing is critically important,” Yun says. “While mortgage rates remain elevated, they are expected to stabilize.”
The 30-year fixed-rate mortgage averaged 6.78% as of Nov. 14, according to Freddie Mac. Yun predicts mortgage rates to moderate in the low 6% range for 2025 and 2026, although they could go even lower depending on economic conditions. (Catch up on Yun’s 2025 housing predictions, which he revealed at NAR NXT in Boston.)
Could Even More Housing Inventory Be on the Horizon?
Home buyers continue to find greater options in the housing market, with inventory up 19% compared to a year ago, according to NAR’s home sales report. That marks the equivalent of a 4.2-month supply at the current sales pace, a pronounced gain for a housing market that has often been starved of listings in recent years.
Adding to the inventory potential, home builders are bullish on more single-family home construction in the months ahead despite a report this week showing a 3% dip in housing starts in October compared to September.
“Builders anticipate an improved regulatory environment in 2025 that will allow the industry to increase housing supply,” says Carl Harris, chairman of the National Association of Home Builders.
Further, interest rate cuts from the Federal Reserve through 2025 could result in lower costs for construction and development loans, which would help expand single-family home building, adds Robert Dietz, the NAHB’s chief economist.
The new-home market has accounted for a greater share of home sales in recent months as home builders increasingly look to entice potential buyers with sales incentives. Sixty percent of home builders recently reported using sales incentives, such as buying down mortgage rates. What’s more, nearly one-third of builders cut home prices in November, with an average reduction of 5%, according to the newly released NAHB/Wells Fargo Housing Market Index.
Regional Breakdown
Here’s a closer look at how existing-home sales fared across the country last month, according to NAR’s latest housing report:
- Northeast: Sales rose 2.2% in October compared to September, reaching an annual rate of 470,000, which is nearly identical to October 2023. Median price: $472,900, up 7.6% from last year.
- Midwest: Sales jumped 6.7% in October, reaching an annual rate of 950,000. Sales are up 1.1% compared to the prior year. Median price: $305,300, up 7.2% from October 2023.
- South: Existing-home sales in October climbed 2.9% from September, settling in at an annual rate of 1.77 million in October. That marks a 2.3% increase from one year before. Median price: $361,200, up 0.9% from one year earlier.
- West: Sales increased 1.3% in October, reaching an annual rate of 770,000—up 8.5% from a year ago. Median price: $627,700, up 4.4% from October 2023.
