Pending Home Sales Are Down 31% From Last Year. Economists Go Into Panic Mode As Sales Are Worse Than They Predicted
The National Association of Realtors says pending home sales continued to plummet in September. Market indicators show a 10.2% month-over-month decline that resulted in an index reading of 79.5.
This is the fourth consecutive month of declines. Pending home sales have now fallen in 10 of the last 11 months.
Economists predicted that pending home sales would drop by 4.0% in September. This is worse than economists predicted.
Year over year, the PHSI was down 31.0%. This is the 16th consecutive month of annual drops. An index of 100 is equal to the level of contract activity in 2001.
Real estate groups say this is due to inflation and higher interest rates.
New listings are down compared to a year ago because existing homeowners do not want to give up their 3.0% or lower mortgage rate.
The new normal for mortgage rates could be around 7% for a while. On a $300,000 loan, that translates to a typical monthly mortgage payment of nearly $2,000. Now, compare this to $1,265 just one year ago. This is a difference of more than $700 per month. Experts say that when inflation is tamed that mortgage rates will retreat. As a result, this will boost home purchasing power for buyers.
All four major U.S. regions recorded year-over-year decreases in contract signings. The Western region saw the largest drop at 38.7% to a reading of 62.7.
Senior Realtor.com economist, George Ratiu said the pain is expected to continue for some time:
“As we look to the remainder of the year, we can expect interest rates to continue their upward trajectory. The Federal Reserve’s monetary tightening has not yet made a dent in inflation, which means that the bank is expected to hike its policy rate further.”