The US housing market showed signs of recovery in October, with existing home sales posting the first year-over-year increase since mid-2021. According to the National Association of Realtors (NAR), sales climbed by 3.4% last month to an annualized rate of 3.96 million units, surpassing economists' predictions of 3.93 million units. This is a notable improvement from September’s 3.83 million-unit rate, which was the lowest recorded since October 2010. The annual increase of 2.9% in October marks a significant turning point for the housing market.

Mortgage Rates Drive Buyer Interest

Declining mortgage rates in August and September played a critical role in this rebound. Anticipation of the Federal Reserve easing its monetary policy, including its first interest rate cut since 2020, encouraged buyers to act. A half-percentage-point drop in mortgage rates during September spurred buying activity, and another quarter-point decrease in October has fueled optimism for sustained growth in home sales.

However, rising US Treasury yields, driven by robust economic data and concerns over potential inflation from President-elect Donald Trump’s proposed policies (such as tariffs and mass deportations), could influence future trends.

Housing Inventory and Market Dynamics

Despite the sales increase, housing inventory remains a key factor to monitor. If the current sales pace persists, inventory would be exhausted in 4.2 months, up from 3.6 months in September. While this marks an improvement, the ideal inventory range is between 4 and 7 months, which would indicate a balanced market.

Other market metrics also reflect a mixed recovery:

• Days on Market: Homes averaged 29 days on the market in October, compared to 23 days in October 2022.
• First-Time Buyers: First-time buyers accounted for 27% of transactions, a slight decline from 28% in 2023 and significantly below the 40% analysts view as indicative of a robust market.
• Cash Sales: Represented 27% of total transactions.
• Distressed Sales: Foreclosures and other distressed sales made up only 2% of total sales, underscoring market stability.

What Lies Ahead for the Housing Market?

The housing market's recovery hinges on multiple factors, including mortgage rates, economic policies, and inventory levels. While the recent uptick in sales is promising, sustained growth will require continued affordability and an influx of first-time buyers to bolster demand.

Stay tuned for further updates as the market adapts to evolving economic conditions and potential policy shifts.

Source: Reuters.com