Pending home sales fall for the fifth straight month
Offers to buy homes dropped again in October, and were off 37% year-over-year, as higher interest rates and inflation slowed down real estate activity.
- Pending home sales were down by 4.6% month-over-month in October.
- Three of the four U.S. regions had monthly declines in pending sales activity, with the sharpest drop in the West.
Pending U.S. home sales fell for the fifth straight month in October — down by more than 4% — as prospective homebuyers face mortgage interest rates that are at 20-year highs, the National Association of Realtors reported.
NAR Chief Economist Lawrence Yun described October as "a difficult month" for home buyers because of higher interest rates. Hit especially hard were regions of the country where home prices are highest.
"The West region, in particular, suffered from the combination of high interest rates and expensive home prices. Only the Midwest squeaked out a [month-over-month] gain," he said.
Nationally, pending home sales were down by 4.6%, with three of the four U.S. regions analyzed showing month-over-month declines in pending sales activity:
Northeast: Pending sales fell 4.3%
Midwest: Activity increased 3.3% (but pending sales were still off by more than 32% year-over-year)
South: Pending sales dropped 6.4%
West: Pending sales declined by 11.3%
Yun predicted that buyers will return to the market as mortgage rates start to come down and stabilize. But other economists were less sanguine about the real estate industry and U.S. economy.
'Serious implications for the U.S. economy'
Dr. Lisa Sturtevant, chief economist at Bright MLS, said Wednesday morning that the continued decline in pending sales indicates that home sales "will be at record lows across the country" at the end of the year, exacerbating problems in the overall economy.
"This decline in transactions has serious implications for the U.S. economy as the residential real estate sector is a major component of GDP," she said, adding that "fourth-quarter GDP growth" will be held back by the "stalling housing market."
Sturtevant noted that even with high interest rates and inflation, homes are still selling quickly in many markets.
But a low inventory of homes is making shopping difficult for prospective buyers. "While many buyers are on the sidelines and discretionary purchases have been put on hold, there are still individuals and families who have to move," Sturtevant said. "These home shoppers are still finding that there are few new listings to choose from. That's because sellers are holding back as well."