Pending home sales dropped 1.5% in October, according to a Nov. 30 report issued by the National Association of REALTORS® (NAR). The Northeast posted a monthly gain in transactions while the Midwest, South and West all recorded losses. All four U.S. regions noted year-over-year declines in transactions.
The Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—dropped 1.5% to 71.4 in October, the lowest number since the index originated in 2001. Year-over-year, pending transactions declined 8.5%. An index of 100 is equal to the level of contract activity in 2001.
“During October, mortgage rates were at their highest, and contract signings for existing homes were at their lowest in more than 20 years,” said NAR Chief Economist Dr. Lawrence Yun. “Recent weeks’ successive declines in mortgage rates will help qualify more homebuyers, but limited housing inventory is significantly preventing housing demand from fully being satisfied. Multiple offers, of course, yield only one winner, with the rest left to continue their search.”
The Northeast PHSI jumped 2.7% from last month to 64.8, representing a loss of 6.5% from October 2022. The Midwest index contracted 0.4% to 73.8 in October, down 10.3% from one year ago.
The South PHSI decreased 1.9% to 85.6 in October, declining 7.1% from the prior year. The West index fell 6% in October to 51.8, dipping 10.8% from October 2022.
“Home sales are rising in places where more inventory is available,” Yun added. “Sales for properties priced above $750,000 were higher than a year ago, because there is more inventory at this price point than what we saw last October. Additionally, newly built home sales are up 4.5% year-to-date due to homebuilders’ ability to create more inventory. It is vital that we continue to focus on boosting housing supply by all means in all corners of the country over the coming months.”
“While pending home sales tend to see a seasonal slowdown during the holiday season, the new year offers more to look forward to,” said CoreLogic Chief Economist Dr. Selma Hepp. “Recent Fed comments indicate the possibility of interest rate cuts earlier in 2024, helping to pick up home sales. Additionally, Fannie Mae, Freddie Mac and the FHA also raised next year’s loan limits across the nation, which may offer more opportunities for homebuyers amid continued increases in home prices.”
Realtor.com® Senior Economic Research Analyst Hannah Jones noted that “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 challenges weigh on buyers. As the cost of homeownership remains out of reach for many would-be buyers, homebuilder sentiment fell to the lowest level since December 2022, suggesting builders are concerned about how ongoing affordability headwinds will impact buyer demand.”
Key takeaways:
- Pending home sales decreased last month, down 1.5% from September.
- Month-over-month, contract signings intensified in the Northeast but diminished in the Midwest, South and West.
- Pending home sales dropped in all four U.S. regions compared to one year ago.
