After a late-summer swell in pending home sales in August, signed contracts deflated in September, remaining unchanged from the previous month.
New data from the National Association of Realtors indicate monthly gains in the Northeast and South were offset by declines in the Midwest and West as pending home sales nationally declined 0.9% from a year ago.
“Contract signings matched the second-strongest pace of the year,” said NAR Chief Economist Lawrence Yun in a press release. “However, signings have yet to fully reach the level needed for a healthy market despite mortgage rates reaching a one-year low.”
Pending contracts provide an indicator of upcoming closed home sales, though the duration between pending contracts and completed sales varies due to numerous factors, such as difficulty obtaining financing or inspection complications.
Some pending sales are canceled or fall through, never translating to closed sales.
The number of homes under contract in August increased 4% from July and 3.8% year over year, boosted by falling mortgages rates that month. Many of those pending sales culminated in the 1.5% monthly increase in September’s existing-home sales.
On a monthly basis, pending home sales in September rose 3.1% in the Northeast and 1.1% in the South, while falling 3.4% in the Midwest and 0.2% in the West.
Annually, pending home sales rose 0.5% in the Northeast and 0.9% in the South, while falling 1.5% in the Midwest and 5.3% in the West.
Released concurrently with pending sales figures, survey responses to NAR’s September Realtors Confidence Index indicated 20% of NAR members expect an increase in buyer traffic over the next three months, a 1% increase from August, while 19% expect an increase in seller traffic.
Ultimately, cost pressures continue to hinder home sales and optimism in future activity.
“Affordability is still a constraint even as rates have fallen to their lowest level in a year,” said Lisa Sturtevant, chief economist of multiple-listing service Bright MLS, in an email to Scotsman Guide.
Sturtevant added that “consumers are generally feeling more cautious amidst growing economic uncertainty,” though markets with “stronger regional economies will see more robust buyer activity” heading into the winter months.
Tuesday’s publication of the Consumer Confidence Index for October by The Conference Board, a nonprofit research group that conducts the widely cited monthly survey, affirmed as much.
Pessimism about future employment and business conditions rose from September among younger and lower-income consumers, while more consumers made note of the ongoing government shutdown and U.S. politics in write-in-responses.
Nevertheless, easing mortgage rates, softening home price gains and rising inventory in markets across the U.S. have gradually shifted market conditions in favor of homebuyers through the summer homebuying season.
Yun noted in the press release that five-year highs in for-sale inventory should continue to give homebuyers optionality and room to negotiate.
“Looking ahead, mortgage rates are trending toward three-year lows, which should further improve affordability, though the government shutdown could temporarily slow home sales activity,” he said.
