By Nicole Friedman

Sales of previously owned homes rose to a new 14-year high in October while median home prices again hit new highs.

Existing-home sales rose 4.3% in October from September to a seasonally adjusted annual rate of 6.85 million, the highest level since February 2006, the National Association of Realtors said Thursday. The October sales marked a 26.6% increase from a year earlier.

Economists surveyed by The Wall Street Journal expected a 1.2% monthly decline in sales of previously owned homes, which make up most of the housing market.

"Home sales are just booming in the current environment," said Lawrence Yun, NAR's chief economist. "The upper-end market is really flying."

Home prices have climbed in recent months as low interest rates spur strong demand, especially for expensive homes, while the supply of homes on the market remains constrained. The median existing-home price rose 15.5% from a year earlier to $313,000, a record high nominally and adjusted for inflation, NAR said.

As home prices continue to rise, economists say affordability is a growing concern. Record-low interest rates have offset much of the effect of higher prices for consumers this year. But the shortage of homes for sale is leading to bidding wars, making it harder for first-time home buyers to enter the market.

Erica and James Robinson said they viewed dozens of homes and put in more than 10 offers before buying a four-bedroom home in Hemet, Calif., in October. They widened the geographic area they were searching in to find bigger houses within their budget.

"We had to decide, what are we going to sacrifice?" Ms. Robinson said. "I personally wanted to throw in the towel more than once."

Real-estate agents say demand remains high from shoppers looking for more space to accommodate working from home. Home sales were especially strong at the high end of the market, with sales of homes priced at over $1 million more than doubling in October compared with a year earlier, according to NAR.

Kristen Whitaker bought a three-bedroom townhouse with a small backyard in Philadelphia in October. "It truly was the low interest rates. I was like, 'Now is the time,'" she said. She and her boyfriend had been living in a two-bedroom apartment, and they wanted more space during the pandemic, she said.

There were 1.42 million homes for sale at the end of October, down 2.7% from September and down 19.8% from October 2019, according to NAR. At the current sales pace, there was a 2.5-month supply of homes on the market at the end of October, a record low.

The supply shortage could worsen in the coming months as the number of newly reported Covid-19 cases rises because some would-be sellers are unwilling to put homes on the market, said Doug Duncan, chief economist at Fannie Mae. Many potential home sellers are older, he said. "It might be the time of their life they would like to downsize, but they're not going to downsize at a risk to their health," he said.

Existing-home sales rose the most month-over-month in the Midwest, at 8.6%, and in the Northeast, at 4.7%.

Homes typically go under contract a month or two before the contract closes, so the October figures largely reflect purchase decisions made in September or August.

New-home sales have also climbed in recent months. A measure of U.S. home-builder confidence rose to a record high in November in data going back to 1985, the National Association of Home Builders said Tuesday.

Housing starts, a measure of U.S. home-building, rose 4.9% in October from September, the Commerce Department said Wednesday.

News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.

Write to Nicole Friedman at nicole.friedman@wsj.com

(END) Dow Jones Newswires

11-19-20 1052ET