Why Did U.S. Home Sales Increase in October 2014? Key Factors Explained

After months of decline, U.S. home sales experienced a notable 2.2 percent year-over-year increase in October 2014. This growth was primarily driven by a combination of more favorable mortgage rates dipping below 4 percent, a significant 9 percent annual rise in housing inventory, and modest improvements in local income levels in key metropolitan areas. The data indicates that for a housing recovery to be sustainable, buyer purchasing power must keep pace with home price appreciation.

What Drove the Sudden Increase in Home Sales?

The October sales surge was not accidental. After a year of sluggish performance, three major economic factors aligned to create a favorable buying environment. The national unemployment rate dropped to 5.8 percent, increasing consumer confidence. Simultaneously, the rate of home price appreciation moderated to 3.8 percent annually, its slowest pace since January 2012, making homes more affordable relative to the rapid price gains seen in previous years. The most immediate catalyst, however, was the long-awaited expansion of housing supply. The number of homes for sale increased by 9 percent compared to the previous year, giving buyers more options and reducing the fierce competition that had characterized the market.

How Did Local Income and Inventory Affect Different Markets?

The national trend played out distinctly at the local level, with the strongest sales growth occurring in markets where income growth supported affordability and new listings surged.

Conversely, markets with declining sales, such as San Francisco and Long Island, saw median incomes drop by 1.4 percent and 1.8 percent, respectively, while home prices rose sharply. This mismatch between income and housing costs caused buyers to pull back. As one Miami real estate agent (a licensed professional who represents buyers or sellers in transactions) noted, the increase in supply, especially for luxury homes, brought previously hesitant buyers back into the market.

What Does the Market Data Suggest for Future Health?

A critical indicator of a shifting market was the decline in homes selling above their list price. In October, only 16.5 percent of homes sold above asking, the lowest level since February 2012. This suggests that pricing is becoming more aligned with what buyers are willing and able to pay. The moderation in price growth is a positive sign for long-term health, but sustainability hinges on wage growth. For the housing market to remain healthy, incomes must increase in tandem with home prices.

Based on our experience assessment, the October 2014 data highlights that a balanced market requires three key elements: manageable price growth, an adequate supply of homes for sale, and supportive local income trends. Buyers are responsive to improvements in affordability and choice, but stagnant wages in high-cost areas remain a significant barrier to a full, robust recovery.