Pending home sales stagger again in September

Pending home sales declined for a fourth straight month in September, the National Association of Realtors reported this morning.

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, fell 10.2% to 79.5 in September. 

Year-over-year transactions plunged 31%, the NAR said. An index of 100 is equal to the level of contract activity in 2001.

“Persistent inflation has proven quite harmful to the housing market,” said NAR Chief Economist Lawrence Yun. “The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers.”

Yun also notes that new home listings are down compared to one year ago since many homeowners are unwilling to give up the rock-bottom, 3% mortgage rates that they locked in prior to this year.

“The new normal for mortgage rates could be around 7% for a while,” Yun added. “On a $300,000 loan, that translates to a typical monthly mortgage payment of nearly $2,000, compared to $1,265 just one year ago – a difference of more than $700 per month. Only when inflation is tamed will mortgage rates retreat and boost home purchasing power for buyers.”

Here’s how the PHSI breaks down by region:

• The Northeast PHSI descended 16.2% from last month to 64.2, a decline of 30.1% from September 2021. 
• The Midwest index retracted 8.8% to 80.7 in September, down 26.7% from one year ago.
• The South PHSI faded 8.1% to 97.0 in September, a drop of 30% from the prior year. 
• The West index slipped by 11.7% in September to 62.7, down 38.7% from September 2021.

The National Association of Realtors is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.

Click here for the full pending home sales report from the NAR.