Falling rates create momentum for buyers

The housing market showed signs of renewed energy in September as sales of previously owned homes increased 1.5% from August, reaching a seasonally adjusted annual rate of 4.06 million units according to data from the National Association of Realtors. The figure marked the highest sales pace recorded in seven months, offering a glimmer of optimism for a market that has struggled with affordability challenges throughout much of 2025.

Sales also demonstrated strength when compared to the previous year, climbing 4.1% higher than September 2024 levels. The gains reflect growing buyer confidence as mortgage rates have steadily declined from their summer peaks. Since the beginning of July, when the average 30-year fixed mortgage rate stood at 6.67%, rates have fallen to 6.17% according to Mortgage News Daily data.

Regional performance varies across the country

Geographic differences emerged when examining sales patterns across various regions. On an annual basis, the South and Northeast posted the strongest performance, attracting buyers with their diverse housing options and relatively better affordability compared to coastal markets. Monthly comparisons from August revealed that the West led in sales growth, while the Midwest stood alone as the only region experiencing a slight decline in activity.

These geographic variations highlight how local economic conditions, job markets and housing supply differences create distinct market dynamics even as national trends point toward improvement. Buyers in different regions face unique challenges and opportunities based on their local circumstances.

The timing factor matters

An important detail about September’s sales figures involves understanding when these transactions began. The reported numbers reflect closings that occurred in September, meaning most buyers likely signed contracts during July and August when mortgage rates were declining but remained higher than current levels. This suggests upcoming months could see even stronger sales activity as buyers respond to today’s more favorable rates.

The lag between contract signing and closing means the full impact of rate decreases hasn’t yet appeared in the data. Prospective buyers who hesitated earlier in the year due to rate concerns may now feel more comfortable entering the market, potentially driving additional growth in coming months.

Supply improvements still fall short

Housing inventory continued its gradual recovery, rising 14% compared to September 2024 to reach 1.55 million units available for sale at month’s end. While this represents progress, the current supply level remains lean by historical standards. At the prevailing sales pace, the market has a 4.6-month supply of homes, still below the six-month supply economists consider balanced between buyers and sellers.

The inventory situation reflects broader dynamics affecting the housing market. Many current homeowners remain financially comfortable and feel little pressure to sell, resulting in minimal distressed properties or forced sales entering the market. This stability benefits existing homeowners but continues creating challenges for buyers hoping increased supply will moderate prices.

Prices maintain upward trajectory

Despite improved inventory and falling mortgage rates, home prices continued their relentless climb. The median price for homes sold in September reached $415,200, representing a 2.1% increase from the previous year. This marked the 27th consecutive month of annual price gains, demonstrating remarkable persistence even as affordability concerns mount.

Current prices stand 53% higher than pre-pandemic levels, reflecting the dramatic transformation the housing market underwent following 2020. For many potential buyers, particularly younger Americans and first-time purchasers, these elevated prices represent significant barriers even with more favorable financing terms.

Luxury market outperforms entry level

Sales patterns revealed stark differences across price tiers, with the high end of the market experiencing the strongest growth. Homes priced above $1 million saw sales surge 20% compared to the previous year, likely benefiting from greater inventory availability in luxury segments. Conversely, homes priced below $100,000 recorded gains of just under 3%, illustrating how supply constraints hit entry-level buyers hardest.

First-time homebuyers made modest progress, comprising 30% of September sales compared to 26% a year earlier. The improvement suggests falling mortgage rates are helping some younger buyers overcome affordability hurdles, though their share of the market remains below historical norms.

Market dynamics continue evolving

Additional data points provide context for current conditions. Approximately 30% of sales were all-cash transactions, indicating significant buyer purchasing power exists despite financing challenges facing others. Properties are remaining on the market longer, averaging 33 days compared to 28 days a year ago, suggesting buyers are becoming more selective as they evaluate options.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. The author and publication are not registered investment advisors and do not provide personalized investment recommendations.