U.S. Existing Home Sales Jump to Seven‑Month High: Who’s Buying, and What Comes Next?
The Numbers
U.S. existing home sales rose 1.5 % in September to a seasonally adjusted annual rate of 4.06 million units, the highest level since February. The National Association of Realtors (NAR) report, highlighted by Reuters, shows sales rose in the Northeast, South and West but fell in the Midwest. On a year‑over‑year basis, sales jumped 4.1 %.
What’s driving the rebound? Mortgage rates have fallen from January’s peak. The average 30‑year fixed-rate mortgage is now about 6.19 %, down from 7.04 % in January. Freddie Mac confirms that the 30‑year FRM averaged 6.19 % as of Oct. 23, down from 6.27 % the previous week and 6.54 % a year earlier. Lower rates and improved inventory (up 14 % from a year ago to 1.55 million homes) helped loosen the market.
Who’s Buying and Who’s Left Behind?
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High‑Income Buyers Dominate: Sales gains were concentrated in the upper end of the market. Homes priced at $1 million or more surged 20.2 % year‑over‑year, and those between $750,000 and $1 million rose 14.4 %. By contrast, sales in the $100,000–$250,000 range rose just 6 %. Wealthy households are benefiting from stock‑market gains, whereas middle‑income buyers face affordability challenges.
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Affordability Issues Persist: Although mortgage rates have declined, the median existing-home price rose 2.1 % from a year ago to $415,200. First‑time buyers accounted for 30 % of sales, still below the 40 % share considered necessary for a healthy market. Economists note that high rates and elevated prices keep many lower- and middle‑income households on the sidelines.
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Regional Divergences: Sales increased in the Northeast, South and West but declined in the Midwest, reflecting variations in economic growth and job markets. Some realtors report that the government shutdown slowed closings in flood‑prone regions due to disruptions in the National Flood Insurance Program.
Housing Market Dynamics
Several factors complicate the outlook:
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Inventory and Supply: While inventories rose 14 % from a year ago, they remain below pre‑pandemic levels (1.8 million homes). A supply shortage keeps prices elevated and limits affordability.
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Mortgage Refinancing vs. Purchases: Lower rates have spurred refinancing rather than new purchase loans. Homeowners are taking advantage of the rate decline to refinance rather than upgrade, further restricting supply.
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Economic Uncertainty: A hazy economic outlook and a stalled labor market could curb demand. The Fed is expected to cut rates, but the timing and magnitude of future cuts remain uncertain. Tariffs and a slowing labor market may discourage potential buyers.
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Price Segmentation: The mismatch between high-end and lower-end sales signals growing inequality in housing. Wealthier buyers can capitalize on lower rates and stock‑market wealth, while median households struggle.
What to Watch
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Future Rate Cuts: A dovish Fed could reduce mortgage rates further, potentially boosting sales, but inflation remains sticky. Another rate cut in December is widely expected.
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Affordability Policies: Policymakers may consider extending tax credits or down‑payment assistance programs to help first‑time buyers. Watching legislative developments can provide clues about future demand.
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Regional Economies: Monitoring job growth in different regions can signal where housing activity will pick up or slow down. The Midwest’s decline highlights the vulnerability of certain areas to broader economic headwinds.
Bottom Line
The surge in existing home sales signals pent‑up demand amid falling mortgage rates. But affordability remains a significant hurdle for many households. Investors should monitor rate trends and regional economic conditions. For would‑be buyers, it may be wise to lock in rates sooner rather than later, but remain realistic about price pressures and competition at lower price points.
