US Pending Home Sales Spike in September Amid Falling Mortgage Rates

Existing Home Sales vs New Home Sales

Despite a 14-year low in existing home sales, new home sales witnessed a surge in September. This leaves the pending home sales data to determine the current state of the US housing market.

The Winner: Pending Home Sales

Surprisingly, pending home sales saw a significant increase of 7.4% MoM (Month-over-Month), exceeding the expected 1.9% in September. This is the largest MoM increase since the COVID lockdowns in June 2020. This considerable increase resulted in a 2.16% YoY (Year-over-Year) sales increase, marking the first annual gain since November 2021.

Reaction from Lawrence Yun, NAR Chief Economist

Lawrence Yun, the Chief Economist at NAR (National Association of Realtors), attributed this rise to lower mortgage rates in late summer and a wider selection of inventory. He anticipates further gains if the economy continues to add jobs, inventory levels increase, and mortgage rates remain steady.

Rebound of the Total Pending Home Sales Index

The total pending home sales index has bounced back from record lows. In September, mortgage rates rapidly fell below 7.00%, but since then, mortgage applications have plummeted as mortgage rates rose back to 7.25% following the Federal Reserve's rate cuts.

Regional Sales Increase

Pending sales increased across all regions of the US, with a 9.8% increase in the West, 7.1% in the Midwest, 6.7% in the South, and 6.5% in the Northeast, according to NAR data.

Future Predictions by Lawrence Yun

Yun anticipates a slower appreciation in home prices to boost sales over the next couple of years. He forecasts a rise in existing-home sales to 4.47 million in 2025 and over 5 million in 2026, following two years of sluggish home sales in 2023 and 2024. Yun also expects a slower rate of growth in home prices, roughly in line with the consumer price index, due to additional supply reaching the market.

Pending Home Sales as a Leading Indicator

It's worth noting that pending home sales usually serve as a leading indicator for previously owned homes, as houses typically go under contract a month or two before they are sold.

Bottom Line

The US housing market has shown signs of resilience amid fluctuating mortgage rates and economic conditions. The surge in pending home sales in September is a positive sign, but the question remains: will this trend continue, or is it a temporary spike? What are your thoughts on this development in the housing market? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.