First-Time Homebuyers Hit 32% Of Sales In October As Housing Affordability Shows Signs Of Modest Improvement

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A 43-day federal funding lapse shut down rural lending programs, flood insurance applications froze in place, and thousands of buyers faced closing delays, but sales  last month still climbed.

Existing home transactions rose 1.2% from September to reach 4.1 million on a seasonally adjusted annual basis, the National Association of Realtors reported on Nov. 20. First-time buyers accounted for 32% of purchases last month, jumping from 27% one year earlier and 30% in September, the trade group said.

The increase came despite hurdles created by the longest government shutdown on record, which prevented access to U.S. Department of Agriculture loans and National Flood Insurance Program coverage throughout October, according to Homes.com.

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Midwest Housing Market Posts Strongest Gains

NAR Chief Economist Lawrence Yun said homebuyers used lower mortgage rates during October to move forward with purchases despite the federal shutdown. "Home sales increased in October even with the government shutdown due to homebuyers taking advantage of lower mortgage rates," Yun said in the NAR report.

He added that first-time buyers continue to face supply pressure in the Northeast and high prices in the West, while conditions remain more favorable in the Midwest and South because inventory is more accessible in those regions.

Buyers entered the month with slightly lower mortgage rates and more inventory than one year earlier, which created uneven movement across the country as local supply levels shaped buyer activity, according to NAR. The association said last month produced a blend of stronger interest in some markets and softer demand in others as households navigated price conditions unique to each region.

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The Midwest led all regions with a 5.3% monthly sales increase. The median sales price in the region stood at $319,500, making homes significantly more affordable than in other parts of the nation. Southern states registered a 0.5% gain, while the Northeast region remained flat and Western states declined 1.3%.

Year-over-year comparisons showed sales rose 4.3% in the Northeast, 2.8% in the South, and 2.1% in the Midwest. The West dropped 2.6% compared to October 2024, according to NAR.

Mortgage Rates Near 6% May Not Be Low Enough

Borrowing costs have declined close to 6%, but Yun cautioned that additional drops may be necessary to restore normal market activity. “To get 1 million more sales requires drastically more supply — we’re not seeing that,” he said during the NAR: NXT conference on Nov. 14 in Houston, Texas, according to Homes.com. “We also need a much more meaningful decline in rates. If they could get to 5.9% or 5.8%, that could psychologically [affect] buyers.”

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NAR calculated in July that rates falling to 6% would bring an additional 500,000 buyers into the market. Reaching 5 million annual sales would require another 500,000 purchasers beyond that threshold.

The last time the market operated at normal levels was 2019, before the pandemic, when annual sales reached 5.2 million, Yun said.

Inventory Remains Below Market Needs

Available homes for purchase totaled 1.52 million in October, down slightly from September. Current supply increased 11% from one year ago, representing 4.4 months of inventory, compared to 4.5 months the previous month, NAR said.

Yun predicted at the NAR conference that 2026 would bring stronger conditions, with sales expected to rise 14%, according to Homes.com.

Whether the trend in first-time buyer activity represents a sustained shift or a temporary fluctuation remains unclear. The number is encouraging, though determining if it signals a lasting pattern will require additional months of data, Yun said.

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This article First-Time Homebuyers Hit 32% Of Sales In October As Housing Affordability Shows Signs Of Modest Improvement originally appeared on Benzinga.com