Pending home sales rebounded in October after a September drop, though the year-over-year (YOY) numbers were mild, according to the National Association of Realtor’s (NAR) Pending Home Sales Index.
The Index, which is based on contract signings, rose 7.5% to 125.2 in October. An index of 100 is equivalent to the level of contract activity in 2001.
However, signings fell 1.4% YOY.
“Motivated by fast-rising rents and the anticipated increase in mortgage rates, consumers that are on strong financial footing are signing contracts to purchase a home sooner rather than later,” said Lawrence Yun, NAR’s chief economist.
“This solid buying is a testament to demand still being relatively high, as it is occurring during a time when inventory is still markedly low. The notable gain in October assures those total existing-home sales in 2021 will exceed 6 million, which will shape up to be the best performance in 15 years.”
Low inventory has defined the housing market this year, though existing homes continue to enter the market as prices climb. This week, Redfin reported that home prices reached a new all-time high of $359,975 up 14% YOY and the largest increase since early September.
Buyer demand remains high as the Fed begins tapering pandemic stimulus policies, especially after the Biden administration announced its reappointment of Jerome Powell as Fed chairman.
“As we move into 2022, pay down that high-cost debt, because when we get to the back half of the year, that cost of debt is likely to increase even more once the Fed starts to raise interest rates,” Greg McBride, chief financial analyst for Bankrate, said in response to the nomination.
As a result, this winter has sidestepped the seasonal slowdown that typically comes with the holidays. Redfin’s Homebuyer Demand Index hit an all-time high since at least 2017 as the number of listed homes remains seasonally elevated compared to years past.
“The economy is recovering strongly, and mortgage rates are still near all-time lows. Those two forces combined have caused homebuying demand to hit a record high,” said Redfin Chief Economist Daryl Fairweather.
Signings increased in all regions month-over-month but saw the strongest gains in the West and South, which saw increases of 2.1% and 8% MOM, respectively. However, the South’s index inched up only 0.6% YOY, while the West’s dropped 6.2% YOY.
The Northeast saw an increase of 6.9% in the index to 99.5, down 10% YOY. The Midwest’s index rose 11.8% to 124.6, up 5.1% YOY.