In welcome news for the housing market, existing home sales posted their first annual increase in over three years in October.
Existing home sales in October rose 3.4% to a seasonally adjusted annual rate of 3.96 million, the National Association of Realtors reported on Thursday. But the more notable change was that home sales were up 2.9% on an annual basis, marking the first year-over-year increase since July 2021.
The numbers were about in line with what economists had expected. The rise in sales comes a recent increase in mortgage interest rates.
As of Thursday morning, the average rate on a 30-year, fixed-rate mortgage was at 7.05%, according to Mortgage News Daily, which tracks daily changes in rates. In September, mortgage rates fell to about 6.14%.
Total inventory of existing homes was 1.37 million units in October, up 0.7% from the month before, and up 19.1% from a year ago.
“The worst of the downturn in home sales could be over, with increasing inventory leading to more transactions,” said NAR chief economist Lawrence Yun. “Additional job gains and continued economic growth appear assured, resulting in growing housing demand. However, for most first-time homebuyers, mortgage financing is critically important.”
“While mortgage rates remain elevated, they are expected to stabilize,” he added.
Housing affordability was a major issue on the campaign trail, given that voters have already been struggling to afford goods like groceries because of the country’s worst bout of inflation in generations. Troubles with housing affordability only add to consumers’ economic woes.
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New numbers from the National Association of Home Builders/Wells Fargo Cost of Housing Index showed that in the third quarter, a family earning a median income of just under $98,000 needed to use 38% of its total income to cover a mortgage on a median-priced existing home. Low-income families would have dole out 75% of their income to do the same.
“The Cost of Housing Index underscores the severity of the housing affordability crisis in countless communities across the nation,” said NAHB Chairman Carl Harris, a custom home builder from Kansas.