Share
Overview
October marked the beginning of the last quarter of 2024 with no changes in the Effective Federal Funds Rate and a slight increase in inflation and mortgage rates. However, gradual rate cuts are set to continue in November, which will help mortgage rates stabilize in the coming year. Inventory increased in October, further contributing to the consistent growth in housing supply since the start of the year. Despite the modest rise in mortgage rates, continuous job additions and growing housing supply are bringing more buyers to the market.
The increase in housing demand was evident in the leading indicators. The Pending Home Sales Index, a leading indicator of home sales activity, rose for the third consecutive month. Additionally, existing-home sales increased across all four major U.S. regions, suggesting that the worst of the downturn in home sales could be over. Despite a decrease in the Mortgage Bankers Association Purchase Index, which tracks home-loan applications and predicts activity four to six weeks in advance, contract-signing activity suggests that home sales will continue to rise through the end of the year.
The rise in building permits for single-family homes and added jobs in the construction industry present an optimistic outlook for future home buyers. If the labor market continues to add jobs and both inflation and mortgage rates decline, the housing market may soon see an increase in the number of first-time home buyers.
In October 2024, the upper limit of the Federal Funds Rate was set at 5.0%, following a half-point rate cut in September 2024. The Fed is expected to continue reducing the rate in the following months.s of further rate cuts in 2025. The justification for the cut is cooling inflation and smaller job gains in recent months.
The U.S. labor market was essentially unchanged in October, rising by 12,000, following an average monthly gain of 194,000 over the prior 12 months. In October, employment in construction added 8,000 workers, below the average monthly gain of 20,000 over the prior 12 months.
Inventory has been consistently increasing since the beginning of the year. The October inventory of unsold existing homes rose by 0.7% from the previous month to 1.37 million units. The increase is equivalent to 4.2 months’ supply at the current monthly sales pace.
