Sales of previously owned homes increased in September, reaching their highest pace in seven months as lower mortgage rates provided a boost to the housing market. According to the National Association of Realtors (NAR), sales rose 1.5% from August to a seasonally adjusted annual rate of 4.06 million units, slightly below analyst expectations but 4.1% higher than September 2023.

The sales reflect contracts likely signed in July and August, when mortgage rates were higher than today's levels. The average rate on a 30-year fixed mortgage has since fallen from 6.67% in early July to 6.17%, improving affordability. "As anticipated, falling mortgage rates are lifting home sales," said NAR Chief Economist Lawrence Yun.

Inventory showed improvement, rising 14% year-over-year to 1.55 million homes for sale. However, supply remains historically tight, with just a 4.6-month supply available at the current sales pace—still below the six-month level considered balanced.

Despite the inventory gain, low supply continues to exert upward pressure on prices. The median home price in September reached $415,200, a 2.1% annual increase and the 27th consecutive month of year-over-year gains. Home prices are now 53% higher than pre-pandemic levels.

Sales growth was strongest at the high end of the market, where supply is more abundant. Sales of homes priced above $1 million surged 20% from a year ago, while sales of homes under $100,000 rose less than 3%.

First-time homebuyers made up 30% of September sales, up from 26% a year earlier, likely benefiting from the recent dip in borrowing costs. All-cash transactions accounted for 30% of sales, and homes spent an average of 33 days on the market, five days longer than in September 2023.