Pending home sales grew 1.1% in September, according to the latest data from the National Association of REALTORS® (NAR). This reverses the 7.1% drop seen in August.
NAR’s Pending Home Sales Index (PHSI) for September registered at 72.6, reflecting a moderate level of activity (an index of 100 is equal to the 5 to 5.5 million level of contract activity in 2001). Year-over-year, however, pending transactions were still down 11%.
Regionally, the Northeast PHSI increased 0.8% to 63.1, down 12.7% YoY. The Midwest grew 4.1% to 74.3, down 9.2% YoY. The South rose 0.7% to 87.1, down 10.7% YoY. The West fell 1.8% to 55.3, down 12.9% YoY.
The takeaways:
“Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years,” said NAR Chief Economist Lawrence Yun. “Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated.
“Because of homebuilders’ ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates,” he added. “This underscores the importance of increased inventory in helping to get the overall housing market moving.
“Sales are expected to turn positive by early next year, with affordable regions and fast job-creating markets in better positions to recover, led by the Midwest and South,” concluded Yun.
“Pending home sales or contract signings measure the point when a buyer and seller have agreed on the price and terms for a specific home sale. As a result, they tend to lead existing home sales by roughly one to two months. Today’s data signal that home sales activity is likely to remain steady, at a low level, over the next few months as limited options and significant affordability headwinds weigh on buyers,” said realtor.com® Senior Economic Research Analyst Hannah Jones. “Existing-home sales fell to a 13-year low in September, dropping below 4 million for the first time since October 2010. Some home shoppers are finding creative ways to save money for a home purchase in light of today’s challenging housing market. More than half of surveyed buyers have or would consider moving in with their parents to save up to buy a home, especially young buyers who are less likely to have the benefit of existing home equity.
“The housing market typically cools in the late fall through the winter, as buyers and sellers focus their attention on the season’s festivities. With mortgage rates at 20-plus-year highs, it doesn’t take much to convince potential sellers to hold on to their current mortgage and see how the market pans out. As the winter approaches, elevated home prices and climbing mortgage rates may mean that buyers and sellers pull back more severely than in the typical year, hoping for more favorable conditions in the spring.”
