US pending home sales ticked up in September despite mortgage rates surging over 7%.
In a surprise move, pending home sales rose 1.1% in September from August, according to a report released Thursday by the National Association of Realtors. Pending sales were down 11% from a year ago.
The Northeast, Midwest and South saw monthly gains in transactions while the West experienced a loss. All four US regions had year-over-year declines in transactions.
Pending sales had seen slight increases in June and July, despite elevated prices and higher mortgage rates. But mortgage rates topping 7% in August snapped that streak, and pending sales dropped 7% from July to August. September saw pending sales tick back up again.
“Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years,” said Lawrence Yun, chief economist at the National Association of Realtors. “Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated.”
In an updated forecast released Thursday NAR predicts that the 30-year fixed mortgage rate will average 6.9% for 2023 and decrease to an average of 6.3% in 2024.
The higher cost to finance a home and the lower inventory of available homes is expected to lower total existing home sales for the rest of this year, but NAR expects them to rise again in 2024.
NAR forecasts existing-home sales will decrease 17.5% in 2023 from the year before, settling at 4.15 million, before rising 13.5%, to 4.71 million in 2024.
“Sales are expected to turn positive by early next year, with affordable regions and fast job-creating markets in better positions to recover, led by the Midwest and South,” said Yun.
In 2023 the total national median existing-home prices are projected to edge up by only 0.1% to $386,700, compared to 2022. However, they are expected to increase by a more substantial 0.7% next year to $389,500, according to NAR.
Housing starts are expected to have dropped by 10.4% to 1.39 million in 2023, compared to the year prior. They’re then expected to rise by 6.5% to 1.48 million in 2024.
“Because of home builders’ ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates,” said Yun. “This underscores the importance of increased inventory in helping to get the overall housing market moving.”
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