October Housing Market Update: Home Sales Rebound in October Amid Mixed Market Signals

The housing market showed signs of life in October 2024, as existing home sales rose by 1.6% month over month, marking the biggest gain since January 2022, according to Redfin.

This uptick, driven by a temporary dip in mortgage rates in September, also resulted in a 1.7% year-over-year increase in sales— the first annual rise since November 2021. However, this resurgence is tempered by fluctuating mortgage rates, growing buyer leverage and regional disparities in housing trends.

Despite the rise in sales, the broader market remains under pressure. Mortgage rates climbed back to near 7% in October after hitting a low of 6.08% in late September, reducing affordability and dampening demand.

Zillow noted that mortgage payments on a typical home purchase rose by 2.8% month over month, reversing gains made during the September rate drop. As rates remain volatile, buyers and sellers alike are proceeding with caution, leading to slower sales in some regions and a pile-up of inventory.

Competition Favors Buyers in Many Regions

One of the most notable shifts in October was the growing leverage for homebuyers across the U.S. Zillow’s Market Heat Index indicated that the national housing market remains neutral but is edging toward a buyer's market, particularly in the South and parts of the Midwest. Factors such as increased inventory, slowing home price appreciation, and seasonality contributed to this shift.

Inventory recovery has played a significant role. Active listings in October rose by 18.5% year-over-year, according to Zillow, though they remain 27.9% below pre-pandemic levels.

This recovery was most pronounced in Southern metros, including Texas and Florida, where cities like Austin and Tampa saw significant price drops. For example, home values in Austin fell by 1% month-over-month and 3.5% year-over-year, the largest decline among major metro areas.

This shift toward buyer-friendly conditions is further supported by declining home price growth. Realtor.com reported that the national median home list price remained flat year-over-year at $424,950 in October, while the median price per square foot increased by just 2.1%.

Combined with an increase in price reductions—24.8% of listings had price cuts in October, per Zillow—buyers are finding more opportunities to negotiate.

Builders Face Headwinds Despite Long-Term Optimism

While buyers are gaining ground in existing home sales, the new construction market presents a more complex picture. According to the National Association of Home Builders (NAHB), housing starts decreased by 3.1% in October, with single-family starts dropping 6.9%. This decline is attributed to rising mortgage rates, which increased from 6.18% in September to 6.43% in October, eroding affordability for new builds.

However, there are reasons for optimism in the construction sector. Single-family housing starts remain up 9.3% year-to-date, signaling resilience despite short-term fluctuations. Additionally, builder sentiment improved for the third consecutive month in November, as developers anticipate regulatory changes in 2025 that could ease constraints on housing supply.

"Further interest rate cuts from the Federal Reserve through 2025 should result in lower rates for construction and development loans," said NAHB Chief Economist Robert Dietz, projecting stabilization in multifamily construction and expansion in single-family builds.

Regionally, new construction activity showed notable disparities. Housing starts are up 10.4% year-to-date in the Northeast but fell by 5% in the South, where hurricane-related disruptions compounded the impact of higher rates. Multifamily starts rose by 9.6% month-over-month but remain 29.3% lower year-to-date, reflecting ongoing challenges in the rental market.

Time on Market Increases, Reflecting Cooling Demand

Homes are taking longer to sell, a trend consistent across most major metro areas.

Redfin reported that the median time for homes to go under contract in October was 41 days, the slowest pace for the month since 2019 and seven days longer than the previous year. Similarly, Realtor.com found that homes spent an average of 58 days on the market in October, marking the seventh consecutive month of annual increases.

This slowdown in sales velocity stems from a combination of higher mortgage rates and inflated home prices. Buyers are increasingly cautious, leading to a higher percentage of "stale" listings.

"Sellers need to price fairly in this market," said Cory Kirkland, a Redfin agent, noting that unrealistic pricing is deterring potential buyers. Homes that linger on the market are more likely to see price cuts, as evidenced by the 18.6% of listings with price reductions in October, according to Realtor.com.

Not all regions are experiencing the slowdown equally. Southern markets like Tampa and Orlando saw the most significant increases in time on market, with Tampa homes taking 29 additional days to sell compared to last year. Conversely, homes in the Northeast are selling relatively quickly, reflecting tighter inventory in the region.

Regional and Economic Uncertainty Cloud the Outlook

The housing market continues to be shaped by regional variations and broader economic uncertainties. In swing states, home prices align more closely with red states than blue states, according to Realtor.com. These areas are roughly 30-40% less expensive than blue states on a per-square-foot basis but 10-20% more expensive than red states. This pricing dynamic highlights the influence of local economic conditions and housing policies.

Election-related uncertainty also played a role in October's market trends. Redfin noted that 15.5% of home purchases were canceled last month, the highest rate in nearly a year, as buyers hesitated amid economic and political uncertainty. However, demand appears to be rebounding post-election. Redfin reported a 25% year-over-year increase in buyer activity on its platform during the first weekend of November, signaling renewed interest as rates stabilize.

The outlook for the remainder of 2024 and into 2025 remains uncertain. While falling mortgage rates could spur renewed activity, persistent affordability challenges and regional disparities will likely continue to shape market dynamics. As the housing market adapts to shifting economic conditions, buyers and sellers alike will need to stay informed and flexible.

This multifaceted picture of the housing market in October underscores its complexity. With buyers gaining leverage, builders navigating headwinds, and homes spending more time on the market, the sector is at a crossroads. While short-term challenges remain, long-term shifts in affordability, inventory, and economic policy are likely to define its trajectory in the coming years.