By Amina Niasse
NEW YORK (Reuters) -Contracts to buy U.S. existing homes rose unexpectedly in September despite elevated mortgage rates that continue to create gridlock in the housing market, according to a report published on Thursday.
The National Association of Realtors pending home sales index rose 1.1% to 72.6 from 71.8 in August, the largest increase since January. Economists polled by Reuters had expected a decline of 1.8%.
On a year-over-year basis, pending home sales were down 11%.
Pending sales of existing homes rose by the most in the Midwest and Northeast regions in September. The West was the only region to experience a month-to-month drop in contracts signed, falling by 1.8%.
“Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years,” said Lawrence Yun, the NAR’s chief economist. “Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated.”
A BETTER OUTLOOK
For homebuyers taking out a new mortgage last month, their average monthly cost would be $2,155 versus $2,170 in August, according to another survey released by the Mortgage Bankers Association. After a cycle of aggressive rate hikes by the Federal Reserve meant to target inflation, the average 30-year fixed rate on home loans rose to 7.90% last week, the MBA said on Wednesday.
An NAR forecast released on Thursday predicted mortgage rates will drop below 7% during the second quarter of 2024, declining to an average 6.3% for the year. While the forecast signals coming relief for prospective buyers, the figure remains more than double 2021’s 3% average interest rate and one point above 2022’s 5.3% rate.
Existing home sales, seen declining this year by 17.5%, are expected to rebound by 13.5% in 2024 as robust labor activity increases in certain markets, said Yun. The NAR expects the Midwest and South to lead the upturn.
New home sales, which have risen this year even as sales of existing homes have fallen, should grow by 19.4% in 2024, the NAR said. Sales of new homes increased by 12.3% in September from the month prior according to another report released on Wednesday by the Census Bureau.
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