Pending home sales fell for a third consecutive month in August, with three of the four regions seeing month-over-month declines, according to the National Association of Realtors.
The Pending Home Sales Index dropped by 2% between July and August. Year-over-year it tanked by 24.2%.
All four regions saw pending sales drop year-over-year. The West, however, experienced a small uptick month-over-month, up by 1.4%. The Northeast PHSI fell by 3.4% from July, while the South fell 0.9% and the Midwest dipped by 5.2%.
“The direction of mortgage rates – upward or downward – is the prime mover for home buying, and decade-high rates have deeply cut into contract signings,” said NAR Chief Economist Lawrence Yun.
“If mortgage rates moderate and the economy continues adding jobs, then home buying should also stabilize.”
He noted that the remainder of this year will be difficult, especially as mortgage rates near 7% in the next few months. NAR predicts that existing-home sales will fall by 15.2% in 2022, and new home sales will fall by 20.9%.
“Next year, the annual median home price is expected to rise by only 1.2%. Home sales will pick up in the second half of 2023, but will be down by 7.1% overall,” Yun added.
Mortgage loan applications have been sinking in the last few weeks as rates rise to levels not seen since 2008. At the same time, home values continue sliding in huge monthly dips.
Areas that saw big gains during the pandemic are now susceptible to fast drops, losing their appreciation momentum from the Great Migration.
Volatile mortgage rates are impacting these areas as borrowers find it increasingly hard to even qualify for a loan, let alone house-hunt.
“Substantial day-to-day and week-to-week rate movements mean that many potential buyers are able to qualify for a loan one week, but not the next, or vice versa,” said Skylar Olsen, chief economist at Zillow.
“Even buyers able to afford a house at current rates could feel frozen, waiting for mortgage rates to fall dramatically again, like they did from the end of June to mid-July, when rates dropped 50 basis points in just two weeks.”
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