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In a surprising turn of events, signed contracts for purchasing existing homes have surged by 7.4% in September compared to August, as reported by the National Association of Realtors. Analysts had anticipated a modest increase of around 1%.
This notable rise in pending sales represents the highest rate since March and marks a 2.6% increase compared to the same month last year.
Pending sales, which reflect signed contracts, offer insight into current buyer interest, highlighting the sensitivity of today’s homebuyers to fluctuations in mortgage rates.
During August, the average rate for a 30-year fixed mortgage gradually decreased, reaching a low of 6.11% by September 11, according to Mortgage News Daily. It maintained this lower level throughout the month before experiencing a sharp increase in October, now exceeding 7%.
“Contract signings rose across all regions of the country as buyers capitalized on the recent decline in mortgage rates and benefited from increased inventory options,” stated Lawrence Yun, chief economist for the Realtors, in a press release. “If the economy continues to create jobs, and inventory levels increase while mortgage rates stabilize, further improvements are expected.”
Analyzing regional trends, there was a year-over-year increase in pending sales in the Northeast and West, with stable figures in the Midwest and South. The West experienced the most significant gains, likely benefiting the most from slight reductions in mortgage rates given its higher home prices.
However, with current rates now elevated, home affordability is becoming increasingly restricted. Despite this challenge, mortgage demand among homebuyers rose by 10% last week compared to the same period last year, according to the Mortgage Bankers Association. Nevertheless, overall mortgage demand remains historically low, mirroring the current sales levels.
“As mortgage rates climb back to around 7%, the rebound in pending sales activity might be temporary, and it is unlikely to be sufficient to push 2024 home sales beyond the levels seen in 2023,” cautioned Selma Hepp, chief economist at CoreLogic.
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