Home Sales Rose in October, But the Trend Won’t Last

It’s always good to buy the dip, but we barely had a chance. 

Sales of used homes in the US rose in October, the National Association of Realtors announced Thursday, as buyers took advantage of a dip in mortgage rates. But it may have been a flash sale, because rates are already climbing again. So what gives?

Get ‘Em While They’re Hot

Used home sales increased 3.4% in October compared with the month before, the National Association of Realtors said, besting a 2.9% monthly increase forecasted by economists surveyed by The Wall Street Journal. Compared with the same period in 2023, home sales increased 2.9% — the first year-over-year gain seen since June 2021. 

The leap in home sales largely reflects the drop in mortgage rates — which fell to as low as 6.08% — following the Fed’s supersize rate cut in September (home sales take a long time to close; October’s sales increase largely reflect buyers who took advantage of low mortgage rates in September). 

But even with another quarter-point rate cut from the Fed earlier this month, mortgage rates are continuing to climb — and they’re not likely to stop any time soon:

• Mortgages usually get packaged together into bonds and are often guaranteed with government backing, so mortgage rates typically end up reflecting 10-year Treasury yields more than short-term interest rates.
• The yield on 10-year Treasury notes began climbing again following the Fed’s September cut, and mortgage rates have followed. The average 30-year fixed loan climbed to 6.84%, Freddie Mac said Thursday, up from 6.78% the week before and the highest since July.

Cancel Culture: The rise in rates may have made some buyers jittery. About 53,000 home purchases were canceled in October, good for just over 15% of homes that went under contract in the month, RedFin said in a report published last week. That marks the highest per-month cancellation rate in nearly a year.