Existing home purchase contracts signed in September increased a surprising 7.4% compared to August, according to the National Association of Realtors. Analysts had expected a gain of about 1%.
These so-called “pending” sales are at their highest level since March, 2.6% higher than last September.
Since pending sales are based on signed contracts and represent the number of people out shopping during the month, it is the latest indicator of buyer demand. It also shows how sensitive today’s buyers are to mortgage rates.
According to Mortgage News Daily, the average interest rate for a 30-year fixed mortgage has been declining throughout August and hit its latest low of 6.11% on September 11. The index stayed around that level for the rest of the month before surging higher in October. Now it’s just over 7%.
“Contract signings increased across all regions of the country as buyers took advantage of lower mortgage rates and greater inventory options in late summer,” Realtors Chief Economist Lawrence Yun said in a release. Both increased. “Further increases are expected if the economy continues to add jobs, inventory levels grow and mortgage rates remain stable. “
Pending sales increased year over year in the Northeast and West and were flat in the Midwest and South. Overall, the biggest gains were seen in the west, where house prices are highest and buyers would benefit the most from even a small drop in interest rates.
With interest rates now higher, affordability is taking another hit. However, homebuyer demand for mortgages still grew last week, rising 10% compared with the same week a year ago, according to the Mortgage Bankers Association. Mortgage demand levels remain at historically low levels, and sales volumes, while higher, are also at historically low levels.
Selma Hepp, chief economist at CoreLogic, said: “With interest rates back up to 7%, the rebound in pending sales activity is likely to be short-lived and unlikely to be enough to help 2024 home sales exceed 2023 levels.
