The housing market’s “new normal” is full of surprises.

The level of existing-home sales soared 10% in September, rising to a seasonally adjusted pace of 4.53 million units, according to the National Association of Realtors (NAR), and handily beating the expectations of analysts, whose consensus prediction had been for 4.30 million.
Why the September surge? With employment still weak and many feeling uncertain about the economy and pending elections, the answer may be mortgage rates, which sank to a historically low rate of 4.35% for a 30-year fixed-rate home loan last month.

“We view the increase in September existing home sales positively, as it potentially signifies a post-tax credit recovery and suggests there may be some elasticity in response to very low relative mortgage rates,” noted Carl E. Reichardt Jr., a managing director and senior equity research analyst with Wells Fargo Securities in San Francisco.

But it is uncertain whether this rally will last given recent hiccups in the housing market, particularly among existing homes, where 35% of September sales came from distressed properties, according to NAR data.. “The recent foreclosure freezes/moratoriums by large banks may lead to some cancellations of current contracts as banks reconsider their ownership and titles become more questionable,” said Reichardt.

That’s not necessarily bad news for new-home builders, though. “While [foreclosure moratoriums by banks] may negatively impact October and November existing and pending home sales data, we expect new home sales to potentially be positively impacted,” Reichardt suggested, as buyers in search of clear titles and straightforward closing timelines choose new homes instead of the hassles of a bargain-priced distressed home deal.

Nationally, the median price of a new home in September was $171,700, compared to a new-home median price of $204,700 in August, the most recent data available as of press time.

Alison Rice is senior editor, online, at BUILDER magazine.

Learn more about markets featured in this article: San Francisco, CA.