Pending home sales sank to their lowest level in 20 years last month, piling on more tough news for the housing market.
NAR’s Pending Home Sales Index fell by 1.5% month-over-month and 8.5% YOY to a reading of 71.4 in October. An index of 100 is equal to the level of contract activity in 2001.
This is slightly better than a 2% decrease predicted by economists surveyed by Bloomberg, but still a blow to the market.
“During October, mortgage rates were at their highest, and contract signings for existing homes were at their lowest in more than 20 years. 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,” said Lawrence Yun, NAR chief economist.
Year-over-year, pending sales dropped by 18.7%.
All four U.S. regions saw declines both month-over-month and year-over-year, with the South and West retreating the most.
All four U.S. regions saw transactions slip YOY, and three of the four had dips from September. Pending sales rose in the Northeast, however, which is experiencing a boom in hot markets.
Metros with the most inventory have the most activity, while newly built homes are also flying off the shelves, up 4.5% from January 2023. Interestingly, sales of properties priced more than $750,000 were up from last year because there are higher-priced homes available on the market thanks to increased competition for lower-priced houses.
This suggests that lack of inventory continues to be a significant factor in buyers’ calculations.
“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 said.
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