US Existing-Home Sales Hit Eight-Month High in October
A surprising surge in housing activity suggests resilience in the market, though analysts caution that high mortgage rates continue to pose a headwind.
A key segment of the U.S. economy showed surprising strength in October, as sales of previously owned homes rose to their highest level in eight months. The unexpected surge offers a sign of resilience for a housing market that has been navigating the crosscurrents of fluctuating mortgage rates and persistent affordability challenges.
Existing-home sales increased to a seasonally adjusted annual rate of 4.09 million in October, the highest level recorded since February, according to data released by the National Association of Realtors. The figures topped economists' forecasts and provided a more optimistic picture for a sector that directly impacts construction, home improvement retailers, and consumer spending.
The uptick in sales activity coincides with a modest retreat in borrowing costs. Mortgage rates, which have been a primary constraint on the market, have eased slightly following the Federal Reserve's recent quarter-point rate cut. The central bank's move in October brought the federal funds rate to a range of 3.75% to 4.00%, offering some relief to prospective buyers.
Despite the positive October data, analysts remain cautious about the path forward. The 30-year fixed mortgage rate continues to hover in the mid-6% range, a level that keeps homeownership out of reach for many. According to forecasts from Fannie Mae, rates are expected to average around 6.3% through the end of the year.
This high-rate environment is expected to keep a lid on significant price appreciation. Zillow anticipates a modest 1.2% rise in home values over the next year, a stark contrast to the rapid gains seen in the post-pandemic boom. The forecast suggests a market that is stabilizing rather than accelerating.
"While the October sales figures are encouraging, the housing market is not out of the woods yet," noted a senior economist at a major financial institution. "Affordability remains a significant hurdle, and until we see a more substantial decline in mortgage rates, transaction volumes are likely to remain subdued compared to historical norms."
Still, the stronger-than-expected sales data dispels some of the more bearish predictions for the sector. Most analysts have dismissed the likelihood of a housing market crash, pointing to fundamentally low inventory levels and significant homeowner equity as stabilizing factors. The improved sales figures reinforce the view that while the market has cooled, it remains on solid footing.
The data provides a critical insight for the broader economy, suggesting that while interest rate-sensitive sectors have felt the impact of monetary tightening, underlying demand remains. As the Federal Reserve weighs its next moves, the surprising durability of the housing market will be a key factor in its assessment of economic health.