Pending home sales take an unexpected jump in September

Contracts signed to purchase existing homes in September rose a surprising 7.4% compared to August, according to the National Association of Realtors. Analysts had expected a gain of around 1%.

These so-called pending sales were at the highest level since March and 2.6% more than in September of last year.

Since pending sales are based on signed contracts, which represent people going out shopping during the month, it is the most current indicator of buyer demand. It also shows how sensitive today’s buyers are to mortgage rates.

The average 30-year fixed mortgage rate has been declining throughout August and hit its most recent low of 6.11% on Sept. 11, according to Mortgage News Daily. It remained around that level for the rest of the month before shooting higher in October. Now it is just over 7%.

“Contract signings increased in all regions of the country as buyers took advantage of the combination of lower late summer mortgage rates and more inventory options,” Lawrence Yun, chief economist at Realtors, said in a statement. “Further gains are expected if the economy continues to create jobs, inventory levels grow and mortgage rates remain stable.”

Regional pending sales were higher year-over-year in the Northeast and West and were stable in the Midwest and South. Overall, gains were greatest in the West, where home prices are highest and buyers would benefit most from even a small drop in rates.

Now that rates are higher, affordability is suffering once again. However, mortgage demand from home buyers continued to rise last week and was 10% higher compared to the same week last year, according to the Mortgage Bankers Association. Mortgage demand levels remain historically low and sales, although higher, are also lower.

“With rates returning to 7%, the pending rebound in activity is likely short-lived and unlikely to be enough to help home sales in 2024 surpass 2023 levels,” said Selma Hepp, chief economist. by CoreLogic.