**Pending Home Sales Hit Record Low in October**
***Sales Drop as Interest Rates Rise***
Pending home sales, a measure of signed contracts on existing homes, dropped 1.5% in October from September. This is according to the National Association of Realtors (NAR), which began tracking this metric in 2001. The October figures are even worse than readings during the financial crisis over a decade ago, and sales were down 8.5% from October of last year.
***Effect of Interest Rates on Housing Demand***
Because the index measures signed contracts, it is the most recent indicator of housing demand. It reflects the buyers who were out shopping in October, which was when the popular 30-year fixed mortgage rate briefly shot higher than 8%. Rates have since pulled back to around 7.3%, according to Mortgage News Daily. The realtors continue to say it’s not just high rates but still very low supply of homes for sale that is deflating activity.
***Chief Economist’s Take***
Lawrence Yun, the chief economist for the NAR, noted that recent successive declines in mortgage rates will help qualify more homebuyers, but limited housing inventory is significantly preventing housing demand from being fully satisfied. He said, “Multiple offers, of course, yield only one winner, with the rest left to continue their search.”
***Regional Variances***
Pending sales fell in all regions month-to-month except in the Northeast. They fell most steeply in the West, which is where homes are most expensive. Sales were down everywhere compared with a year ago.
***Impact on Home Prices***
Tight supply and still-strong demand have kept pressure on home prices, which not only continue to hit new highs but appear to be accelerating in their gains. The Realtors noted that sales of homes priced above $750,000 have been increasing simply because there is more supply on the high end of the market.
***Looking Ahead***
As the housing market faces challenges from high interest rates and low supply, industry experts are closely monitoring the situation to understand the impact on potential homebuyers. While mortgage rates have slightly declined, the limited availability of homes for sale poses a significant barrier to meeting the demand, leaving many homebuyers struggling to find suitable properties in their desired price range.
