A home with a “Sold” sign from a real estate company in North Patchogue, New York.
Steve Post | News Day | Getty Images
A sharp drop in mortgage rates rattled homebuyers in October after a weak summer.
According to the National Association of Realtors, condo sales rose 3.4% last month from September to a seasonally adjusted annual rate of 3.96 million units. Sales were 2.9% higher than in October last year, marking the first annual increase in more than three years.
This count is based on signed contracts, meaning most deals were completed in August and September. During this time, the average interest rate on the popular 30-year fixed-rate mortgage fell. According to Mortgage News Daily, it was around 6.6% at the start of August and fell to a low of 6.11% by mid-September.
“The worst of the downturn in home sales may be over, and rising inventory levels would lead to more transactions,” NAR chief economist Lawrence Yun said in a news release. “Additional employment gains and continued economic growth appear certain, leading to growing demand for housing. However, for most first-time home buyers, mortgage financing is crucial. While mortgage rates remain high, they are expected to stabilize.”
There were 1.37 million units for sale at the end of October, an increase of 19.1% compared to October 2023. This brings the inventory to 4.2 months supply at the current sales pace. It's still on the leaner side, as a six-month supply is considered equal between buyer and seller.
Tight supply continues to put upward pressure on prices. The average price of an existing home sold in October was $407,200, up 4% from a year ago. By price category, there is more activity at the top end of the market than at the bottom end.
“We still need another 30% of inventory to get back to pre-corona levels,” Yun said.
The proportion of cash-only buyers fell from 29% in October 2023 to 27%. That's still high historically, but lower mortgage rates have likely caused that share to decline.
First-time buyers accounted for 27% of sales, down from 28% last year and still historically low. They usually make up 40% of sales.
Mortgage rates are now much higher at 7.05% for the 30-year fixed financing. However, a new report from Redfin showed that the number of potential buyers contacting its brokers has increased recently, particularly after the election. Its so-called demand index rose 17% year-on-year within a week in mid-November to its highest level since August 2023.
“The flood of buyers and sellers entering the market is the result of pent-up demand from people waiting for the election to go through and for the Fed to cut interest rates a second time,” said Chen Zhao of Redfin's economic research lead . “Now we are watching closely to see whether this is a short post-election boom or whether it will be reflected in a steady improvement in upcoming sales.”