In September, the housing market experienced an unexpected resurgence, with signed contracts for existing homes increasing by 7.4% compared to August, as reported by the National Association of Realtors. This figure surpasses the analysts’ forecasts, which anticipated only a nominal gain of about 1%. This significant uptick marks the highest level of pending sales since March, and represents a 2.6% increase from September of the previous year. The importance of this metric lies in its reflection of real-time buyer activity, as it encompasses only signed contracts, thus offering a current snapshot of market demand.
A major factor fueling this increase appears to be the recent trends in mortgage rates. Throughout August, the average rate for a 30-year fixed mortgage gradually declining, even reaching a low of 6.11% on September 11. This period of lowered mortgage costs likely played a crucial role in boosting buyer interest and overall market activity. However, as October rolled in, rates began to climb again, now exceeding 7%. This volatility emphasizes how sensitive today’s buyers are to fluctuations in borrowing costs—a trend likely fueled by broader economic factors and the psychological influence of perceived affordability.
Regionally, pending home sales exhibited varied trends. The Northeast and West saw year-over-year increases, while the Midwest and South remained relatively flat. Notably, the West experienced the most significant gains, where buyers often feel the impact of even minor shifts in mortgage rates most acutely due to already elevated home prices. According to Lawrence Yun, the chief economist for the Realtors, the rise in contract signings corresponds to an ideal combination of lower mortgage rates and increased inventory availability. This suggests that if conditions such as job growth and stable rates persist, further advances in contract signings could be anticipated.
Despite the recent rise in pending sales, there are signs that this momentum may be short-lived. Current data shows that although mortgage demand from potential homebuyers has increased by 10% compared to the same week last year, the overall levels remain historically low. Furthermore, as mortgage rates rise again, affordability is poised to become an ongoing challenge for buyers. CoreLogic’s chief economist, Selma Hepp, warns that while the uptick in pending activity is promising, it may not be sustainable enough to drive home sales in 2024 beyond the levels seen in 2023.
While September’s surge in pending home sales provides a glimmer of hope for the housing market, multiple factors—especially shifting mortgage rates—continue to cast uncertainty on future trends. Stakeholders in real estate must remain vigilant as they navigate this unpredictable landscape.