As we get closer to a new year, the real estate market shows new signs of incremental pick-up. According to the latest Pending Home Sales report from the National Association of Realtors® (NAR), pending home sales inched up 1.9% month-over-month in October.
As Lisa Sturtevant, chief economist of Bright MLS, noted in a statement: “The uptick in new pending contracts last month likely was driven by a drop in mortgage rates and an increase in inventory, which unleashed some of the pent-up demand in the market.”
Realtor.com® Senior Economic Research Analyst Hannah Jones added, in her own statement, how pending home sales tend to forecast an increase in sales in the next one to two months.
“This momentum reflects the tailwinds of easing mortgage rates and gradually improving home supply,” said Jones. “Buyers who have been waiting on the sidelines may find renewed opportunities to secure a home before year end, particularly in markets with ample inventory where sellers are more willing to negotiate.”
However, the number of pending home sales in October was still 0.4% lower than a year prior in October 2024. As Sturtevant noted, this is despite mortgage rates being about the same year-over-year.
“While lower rates have brought out more buyers this fall, there are still major constraints in the housing market,” said Sturtevant. “Home sales activity is likely to be slow through the end of 2025. Rates, which had dropped to a 13-month low, have started to rise again.”
NAR Chief Economist Lawrence Yun, in a statement, heralded a more optimistic view of the economy reflected by this pending sales report.
“Job gains in September, following the data blackout, are reassuring and suggest the economy is not slipping into a recession,” said Yun. “This may boost confidence in future home-buying.”
The “data blackout” refers to the government shutdown and closed agencies being unable to compile regular economic reports. Sturtevant, in her comments, said the lack of data is contributing to “uncertainty” about the economy, and cited “pockets of weakness in consumer spending.”
But housing economists also pointed to seasonality, which normally causes sales to fall through this time period, but can also be a boon to buyers.
“Days on the market typically lengthen from November through February, providing better negotiating power to buyers during the holiday season,” Yun noted. NAR’s REALTORS® Confidence Index survey showed only 17% of NAR members expect an increase in buyer traffic over the next three months, down from 20% in September, which could reflect the holiday seasonality alluded to by Yun.
Sturtevant said, in summation, that: “The fundamentals of the U.S. housing market are still strong. But affordability challenges are going to characterize the housing market for years. Lower mortgage rates will help bring out more buyers next year, but it is going to take time before there is better affordability in the market.”
Regional breakdown
Of the four major U.S. census regions, the Midwest posted the largest month-over-month increase in pending home sales at a 5.3% uptick. Annually, pending sales in the Midwest increased by only 0.9%.
The South posted a modest 1.4% monthly increase in pending sales, and a larger annual increase of 2.0%. Meanwhile, the North posted a 2.3% monthly increase in pending sales, but annually, pending sales declined by 1%.
“In the South, rising inventory and softening prices improved affordability and strengthened buyers’ negotiating power,” said Jones in her statement. “By contrast, the Northeast and Midwest still face tight inventory, elevated competition and strong demand for affordable, well-located homes. Even so, gradually improving inventory this fall provided a lift to much of the country.”
The West is the only region where pending sales declined both monthly and annually; pending home sales dropped 1.5% month-over-month and 7% year-over-year.
“The Midwest shined above other regions due to better affordability, while contract signings retreated in the more expensive West region,” said Yun, contrasting the highest and lowest performing markets for pending sales in October.
For the full pending home sales report, click here.
