Easing Mortgage Rates and Rising Inventory Lift Existing Home Sales in September
Existing home sales climbed to a seven-month high in September as mortgage rates eased and more resale homes hit the market, according to new data from the National Association of Realtors (NAR). Inventory matched its highest level since May 2020, giving buyers more options than they’ve seen in years, even though overall supply still sits below pre-pandemic norms.
Earlier this year, mortgage rates hovered between 6.5% and 7% amid ongoing economic and tariff uncertainty, keeping many would-be buyers and sellers on the sidelines. That picture has started to shift. After the Federal Reserve resumed rate cuts at its September meeting, mortgage rates slipped below 6.5% for the first time this year. Last week, the average rate fell to 6.27%, nearly a one-year low. With additional rate cuts expected in the coming months, lower borrowing costs combined with rising inventory are poised to draw more activity into the market.
In September, total existing home sales, which include single-family homes, townhomes, condominiums, and co-ops, rose 1.5% to a seasonally adjusted annual rate of 4.06 million units. Compared with a year ago, sales were 4.1% higher, signaling that demand is slowly rebuilding as affordability improves from the extremes of the last two years.
Inventory is also finally moving in the right direction. The number of existing homes on the market reached 1.55 million units in September, up 1.3% from August and 14.0% higher than a year earlier. At the current sales pace, that translates into a 4.6-month supply of homes which is unchanged from July and August but higher than the 4.2-month supply seen in September 2024. A range of roughly 4.5 to 6 months’ supply is generally considered a balanced market, suggesting conditions are inching away from the heavily seller-skewed environment of recent years.
Homes are also taking a bit longer to sell. Properties stayed on the market for a median of 33 days in September, up from 31 days in August and 28 days a year ago. That increase reflects both more choices for buyers and a slightly less frantic pace than during the height of the pandemic housing boom, when properties often received multiple offers within days.
One notable shift is the growing presence of first-time buyers. They accounted for 30% of all existing home purchases in September, up from 28% in August and 26% a year earlier. As mortgage rates ease and inventory improves, more entry-level buyers appear to be finding an opening in a market that has been challenging for years.
At the same time, all-cash buyers continue to make up a large share of transactions. In September, 30% of sales were all-cash, up from 28% in August and unchanged from a year ago. Because these buyers are not directly affected by interest rate changes, their steady presence has helped support demand even as financing costs fluctuated.
Prices, meanwhile, remain elevated but show signs of moderating pressure ahead. The median sales price of all existing homes in September was $415,200, up 2.1% from a year earlier and marking the 27th straight month of year-over-year price increases. By contrast, the median price for condominiums and co-ops slipped 0.6% from last year to $360,300. With inventory gradually increasing, NAR expects the recent gains in supply to put downward pressure on resale home prices in many markets in 2025, potentially bringing some long-awaited relief to buyers.
Regionally, the recovery is uneven but generally positive. Three of the four major U.S. regions saw an increase in existing home sales in September. The West led the way with a 5.5% gain, followed by a 2.1% increase in the Northeast and a 1.6% rise in the South. The Midwest was the outlier, with sales dipping 2.1% for the month. On a year-over-year basis, sales were up 6.9% in the South, 4.3% in the Northeast, and 2.2% in the Midwest, while remaining flat in the West.
Looking ahead, contract activity points to further support for sales. The Pending Home Sales Index (PHSI), a forward-looking gauge based on signed contracts, rose from 71.8 to 74.7 in August. Pending sales were 3.8% higher than a year earlier, suggesting that lower mortgage rates are already coaxing more buyers back into the market. If rates continue to drift lower and inventory keeps building, 2025 could bring a more balanced, less volatile housing market than buyers and sellers have faced in recent years.