Home sales rebounded in October, reaching a milestone not seen in years.

Sales of existing homes rose 3.4% in October from September, the National Association of Realtors said Thursday. At October’s seasonally adjusted sales pace, 3.96 million would be sold for the year, up 2.9% from October 2023. It was the first time since July 2021 that the sales pace accelerated year-over-year.

The increase in sales was a rare bright spot in a real estate market that has been nearly paralyzed by a combination of high prices and high mortgage rates. Unaffordable mortgage payments have driven first-time buyers out of the market and greatly slowed sales. Inventory for sale has increased in recent months as more homeowners put their homes on the market, which often means foregoing a low fixed-rate mortgage and instead taking out a new mortgage at a significantly higher interest rate.

“Finally some good news from the housing market,” Lawrence Yun, the association’s chief economist, said in a conference call with reporters. “More inventory is clearly helping to boost home sales despite these increased mortgage rates.”

There were 1.37 million homes for sale in October, a significant increase from the end of last year. However, this is still well below typical pre-pandemic levels, and the pace of sales remains slow by historical standards.

Mortgage interest rates could be the key

Whether the market continues to return to normal could depend on how mortgage rates develop in the coming months.

According to Freddie Mac, the average interest rate on a 30-year fixed mortgage was 6.78% last week, up from 6.08% at the end of September.

Interest rates have risen in recent months even as the Federal Reserve cut its influential interest rate. Financial investors have priced in the potential impact of Donald Trump’s re-election and the possibility that some of his proposed policies would stoke inflation. This in turn has led to an increase in mortgage interest rates, which are particularly influenced by 10-year Treasury yields.

Fed policymakers expect to cut interest rates further in the coming months as long as inflation remains on a downward trend. Yun said that could put downward pressure on mortgage rates, but probably won’t be enough to bring them back to pre-pandemic levels.

“Maybe the mortgage rate will go back toward 6%, but I think that’s about it,” he said. “We’re not going to go back to a 3%, 4%, 5% mortgage rate.”