The housing market is showing signs of life at the end of 2024, posting its first monthly sales gain in more than three years in October as buyers took advantage of a dip in mortgage rates and locked into a home purchase.

Existing home sales increased 3.4% in October compared to the month prior and posted a 2.9% gain from 2023, according to the National Association of Realtors. It was the first increase in annual sales totals since July 2021, putting the housing market on track for its worst year since 1995.

Despite two consecutive down years for the housing market, home values have continued to move steadily upward.

NAR said Thursday the median existing sales price rose 4% from last year to $407,000. The average sales price on existing homes has increased for 16 consecutive months, adding to issues with affordability while providing homeowners with more equity to cash in on down the road.

Additions to the nation’s housing inventory have helped provide buyers with more options to choose from and led to more sales. Housing inventory climbed by 0.7% in October from September, or 4.2 months’ supply at the current sales pace. A balanced market has a five- to six-month supply.

“The worst of the downturn in home sales could be over, with increasing inventory leading to more transactions,” NAR Chief Economist Lawrence Yun said. “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.”

There have been some signs that homebuyers may be checking back into the market with the presidential election decided. Redfin reported last week that its Homebuyer Demand Index jumped to its highest day in more than a year, and the rate of people locking into mortgage rates, another signal of market activity, doubled compared to a year ago.

Elevated mortgage rates have been a stubborn problem for would-be homebuyers to navigate, making it even more expensive to buy a house in a market with limited options and high asking prices.

Mortgage rates have not fallen despite two cuts to their benchmark interest rate from the Federal Reserve. Rates have not fallen because they tend to ebb and flow with the rate of 10-year Treasury bonds, which have increased since the central bank’s decision with investor expectations that the economy will grow and uncertainty about what will happen with price pressures under the incoming Trump administration with plans to enact sweeping tariffs and expanding tax cuts.

While mortgage rates have not dropped despite the cuts, they have settled beneath 7% and are expected to continue to moderate moving forward. Rates are highly influential on housing affordability, with single percentage points being worth hundreds of dollars on a monthly mortgage payment.

Industry analysts have been watching as buyers have started to accept that they will not get rates as low as 3% that were available during the coronavirus pandemic and instead have jumped off the sidelines when they dip toward 6%.

High rates have also caused issues for construction of new homes, as it is more expensive for builders to start and complete projects and for buyers to purchase them. Overall housing starts, a measure of how many homes, apartments, condos and other projects are being built, fell 3.1% in October. Single-family home construction fell 6.9% last month but is up 9.3% compared to the year prior, according to data from the Department of Housing and Urban Development and U.S. Census Bureau.

The National Association of Home Builders attributed the drop to a higher rate environment but noted that builders are expecting a rebound next year with an improved regulatory environment and further Fed cuts.

“Further interest rate cuts from the Federal Reserve through 2025 should result in lower interest rates for construction and development loans, helping to lead to a stabilization for apartment construction and expansion for single-family home building,” NAHB Chief Economist Robert Dietz said in a release Wednesday.

Have a news tip? Contact Austin Denean at atdenean@sbgtv.com or at x.com/austindenean.