Pending home sales drop to lowest level on record
Nationally, pending sales slid 1.5% in October as mortgage rates spiked and buyers retreated.
- Only the Northeast saw pending home sales improve in October, but the West posted a substantial monthly decline of 6.0%.
- Compared to the same period a year ago, all four major regions have seen pending home sales drop as high borrowing costs deter buyers.
- Additional new home inventory combined with softening mortgage rates could prompt a shift in 2024.
Pending home sales fell 1.5% in October, the National Association of Realtors reported, signaling a slight dip in a year that has seen pending home sales zig-zag month-to-month without much consistency.
Compared to the same period last year, pending home sales are down 8.5%, NAR noted.
High borrowing costs have been a major hurdle for homebuyers this year, but that was especially true when rates spiked last month, said NAR chief economist Lawrence Yun.
"During October, mortgage rates were at their highest, and contract signings for existing homes were at their lowest in more than 20 years," he said. "Recent weeks' successive declines in mortgage rates will help qualify more home buyers, but limited housing inventory is significantly preventing housing demand from fully being satisfied."
While sales only fell modestly in October, the decline was enough to push the Pending Homes Sales Index to its lowest level since NAR began collecting data in 2001.
All four major U.S. regions — the Northeast, South, Midwest and West — have seen annual drops in pending home sales, but the Northeast managed to post a 2.7% month-over-month gain in October.
Elsewhere, the Midwest fell by 0.4%, the South decreased by 1.9% and the West slid a dramatic 6.0%.
These figures point to regional variances in available inventory and buyer purchasing power, Yun said.
"Home sales are rising in places where more inventory is available," he said. "Sales for properties priced above $750,000 were higher than a year ago, because there is more inventory at this price point than what we saw last October."
Yun also noted that new home builders have helped push pending home sales up in regions that are seeing a spike in new home inventory.
"It is vital that we continue to focus on boosting housing supply by all means in all corners of the country over the coming months," Yun emphasized.
Ruben Gonzalez, chief economist at Keller Williams, noted that "inventory levels are showing signs of increasing, but this varies by region." And despite some localized gains in supply, buyers "continue to struggle" and rising prices will likely suppress sales activity.
"This year's pause in price growth created a window of opportunity for buyers with cash or large down payments, but that window now appears to be closing. Home prices have resumed their upward march in most major markets," Gonzalez said.
But if homebuilders can continue adding new inventory and mortgage rates continue to soften, there's a chance that the "market will start to shift in 2024," Realtor.com Economic Research Analyst Hannah Jones noted.
"Buyers will continue to contend with affordability challenges, but slightly lower prices and softening mortgage rates will mean that existing home sales remain roughly level (+0.1%) in 2024 with the previous year."