The first annual U.S. sales increase in more than three years did not impress Molly Boesel, chief economist at CoreLogic.

“The housing market is headed for its worst year in more than a decade,” she said in a statement. “The good news is that there is nowhere to go but up. However, stubbornly high mortgage rates and strong home prices will continue to weigh on the housing recovery. Any thaw in the housing market is likely to occur only after the pending winter months.”

Sales of previously occupied homes in the U.S. rose 2.9% from last October, the National Association of Realtors said Thursday. The first year-over-year gain since July 2021 came as transactions moved at a seasonally adjusted annual pace of 3.96 million.

House prices rose on an annual basis for the 16th month in a row. The national median sales price rose 4% from a year earlier to $407,200.

“The worst of the downturn in home sales may be over, with rising inventory leading to more transactions,” said Lawrence Yun, NAR’s chief economist.

Still, with just two months left in the year, existing home sales are on track for the lowest annual home sales since 1995, Yun said.

The U.S. housing market has been in a sales slump dating back to 2022, when mortgage rates began to climb from pandemic-era lows. Existing home sales fell to a nearly 30-year low last year as the average rate on a 30-year mortgage rose to a 23-year high of nearly 8%, according to mortgage buyer Freddie Mac.

The average rate on a 30-year mortgage fell to a two-year low of 6.08% in September, when many of the contracts to purchase homes officially sold in October were likely to be signed. But it has mostly risen since then, reached 6.84% this week.

Economists predict mortgage rates will remain volatile this year, but generally predict they will hover around 6% in 2025.

It may not be attractive enough to entice current homeowners who bought or refinanced at rock-bottom prices from selling. More than 4 in 5 homeowners with a mortgage have an existing interest rate below 6%, according to Realtor.com.

More options

A wider selection of properties on the market as sales slowed this year has been a bright spot for home sellers. There were 1.37 million unsold homes at the end of October, up 0.7% from September and 19.1% from last October, the NAR said.

That translates to a 4.2-month supply at the current pace of sales, which is down from 4.3 months in September, but up from a 3.6-month pace at the end of last October. Traditionally, a 5- to 6-month delivery is considered a balanced market between buyers and sellers.

Another factor helping to lift the inventory of homes on the market: Properties are taking longer to sell than a year ago.

Homes typically stayed on the market for 29 days last month before selling, up from 28 days in September and 23 days in October last year.

While the number of homes for sale has increased this year, housing market inventory remains well below pre-pandemic levels. Consider that there were approximately 1.8 million unsold homes on the market in October 2019.

“We still need another 30% growth in inventory to get us back to pre-COVID,” Yun said.

Stretched buyers

Limited inventory, especially in the more affordable price range of a given market, helps drive prices up. That’s one reason why first-time home buyers, who have no home equity to add to their down payment, continue to struggle to afford a home.

They accounted for just 27% of all homes sold last month. That’s up from 26% in September, but down from 28% last October. First-time buyers have historically accounted for 40% of sales.

Homebuyers who can afford to bypass mortgage rates and pay all cash for a home accounted for 27% of sales last month, down from 29% a year earlier.

While existing homeowners have weathered rising mortgage rates and home prices by using their strong profits in condominiums, first-time buyers have had to save longer for a down payment, often delaying buying their first home by years.

That’s why Americans who can afford to buy a home are getting older. The median age of home buyers between July 2023 and last June climbed to 56, the highest on record dating back to 1981, according to the NAR. The median age of first-time buyers rose to 38 during the same period. Historically, the median age of American home buyers overall has averaged around 44.

Jonathan Lansner of Southern California News Group added to this report.