Income growth and rising home inventory levels helped push house sales up in October compared to last year, marking the first major increase year-to-date, according to a report.
Redfin reported a 2.2 percent increase in the number of homes sold in October compared to the same month last year, making it the first month to see a significant yearly increase in home sales so far in 2014. According to the brokerage, a total of 128,005 homes sold last month across the company's covered markets.
Redfin's data reinforces recent findings from the National Association of Realtors, which estimated October home sales at an adjusted annual rate of 5.26 million, an increase of 2.5 percent from last year.
Redfin's chief economist, Nela Richardson, pointed to a number of factors that played a role in last month's stronger than expected activity.
"The housing market overall benefited in October from a dip in mortgage rates to under 4 percent, a drop in unemployment to 5.8 percent and a continuing slowdown in home price appreciation to 3.8 percent year over year," Richardson said.
Looking at the top markets with strongest sales growth, however, Richardson says two other major factors become apparent: ongoing wage improvements and a jump in for-sale inventory in the prior months.
According to Redfin, among the top five metro areas for annual sales gains, median incomes increased in four, with improvements ranging from 0.7 percent in Raleigh-Durham, North Carolina, to as high as 5.7 percent in Boulder, Colorado. The one exception was Orlando, which remains popular for investors, the company said.
On the other hand, in the five markets with the biggest year declines in sales activity, median incomes fell or were flat in nearly all, while home price increases outpaced the national average of 3.8 percent—the lowest since January 2012.
"[F]or a housing market to be healthy and sustainable over the long term, incomes must increase as home prices rise," Richardson said. "But wages nationally have barely kept up with inflation, let alone house prices, especially in high-cost areas like San Francisco and Long Island."
September's surge in inventory has also helped fuel sales activity, particularly in the country's most supply-choked metros. In Tampa and Orlando, the two strongest cities over the last year, new listings climbed 3.7 percent and 12 percent, respectively, in September and October compared to last year.
By comparison, San Jose and San Francisco, the two weakest markets for sales in the past 12 months, saw new listings fall off by 3.4 percent and 2.8 percent over the same period.
"Two months ago, when demand was strong but supply was lacking, we predicted that an increase in homes for sale would translate into more sales this fall," Richardson said. "In the past two months the number of homes for sale was up 9 percent over last year."