The U.S. housing market may be showing early signs of recovery. Existing home sales rose to a seven-month high in September, though economists warn that ongoing uncertainty and a sluggish labor market could temper the expected boost from easing mortgage rates.
The rise in home resales last month, which was reported by the National Association of Realtors (NAR) on Thursday, was concentrated in the upper end of the housing market as higher-income households enjoy strong wealth gains thanks to a robust stock market.
“We expect existing home sales to move sideways through the end of this year and into early next before improving over the course of 2026 as mortgage rates fall further and the economy and labor market get back on firmer footing,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
Home sales rose 1.5% last month to a seasonally adjusted annual rate of 4.06 million units, the highest level since February, the NAR said.
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The increase was largely fueled by declining mortgage rates, with the average 30-year fixed mortgage rate dropping to 6.27%, down from more than 7% earlier in the year.
Lower borrowing costs improved housing affordability, encouraging a broader spectrum of buyers, including first-time homeowners, to enter the market. Regional trends varied: the Northeast, South, and West saw stronger sales, while the Midwest experienced a slight decline.
On a year-over-year basis, total home sales rose 4.1%, illustrating steady recovery momentum, and the median home price increased 2.1% to $415,200, establishing a new record for September dating back to 1999.
“Affordability has improved from its worst levels but remains close to the unfavorable readings that have prevailed for the past few years,” said Stephen Stanley, chief U.S. economist at Santander.
Housing inventory also showed positive movement, with the number of homes for sale rising 14% to 1.55 million units, the highest level since 2020, although still below pre-pandemic norms. Homes stayed on the market an average of 33 days, and first-time buyers represented roughly 30% of purchases, slightly below the historical target of 40%.
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Despite these gains, challenges remain, including an uneven labor market, economic uncertainty related to import tariffs, and concerns over potential government shutdowns, which may temper future growth. Nevertheless, the combination of falling mortgage rates, increased inventory, and strong buyer demand suggests the U.S. housing market is gradually stabilizing.
This rebound reflects a market adapting to evolving economic conditions, where affordability improvements are playing a critical role in reinvigorating buyer interest and sustaining sales momentum into the final months of 2025.
Looking ahead, the housing market’s trajectory will likely depend on the balance between interest rates, inventory levels, and overall economic stability. Continued improvements in affordability could further encourage buyer participation, while any disruptions in employment or financial markets might slow momentum.