US pending home sales rise more than expected in August
By Michele Maatouk
Date: Wednesday 28 Sep 2022
(Sharecast News) - US pending home sales fell in August, for the third month in a row, according to figures released on Wednesday by the National Association of Realtors.
Pending home sales fell 2% on the month in August, taking the index to 88.4% and versus expectations for a decline of 1.4%. Year-over-year, transactions slumped 24.2%.
NAR chief economist Lawrence Yun said: "The direction of mortgage rates - upward or downward - is the prime mover for home buying, and decade-high rates have deeply cut into contract signings. If mortgage rates moderate and the economy continues adding jobs, then home buying should also stabilise."
Yun said he expects the economy to remain sluggish throughout the remainder of this year, with mortgage rates rising to close to 7% in the coming months.
"Only when inflation calms down will we see mortgage rates begin to steady," he added.
The index for the Northeast fell 3.4% from last month to 76.6, down 19.0% from August 2021. The Midwest index was 5.2% lower at 88.4, marking a 21.1% decline on the previous year.
The index for the South slid 0.9% to 105.4 in August, a decline of 24.2% from a year ago, while the gauge for the West rose 1.4% to 71.0 in August, down 31.3% on the same month a year ago.
Yun said: "Home prices are the least affordable in the West and, consequently, the region suffered deeper annual declines in contract signings due to rising interest rates when compared to other areas of the country. However, the recent increases of the last two months, though small, are encouraging."
Pantheon Macroeconomics said: "We feared an even bigger drop, but this result is still bad. Pending sales have fallen in nine of the past 10 months, dropping by 28% from their October peak. They are closely tracking the plunge in mortgage applications, which have yet to hit bottom. The latest surge in mortgage rates mean that we have to expect applications to keep falling for another couple months at least, so our hopes that home sales would flatten by the end of the year are now hanging in the balance.
"Note too that closed existing home sales have undershot the pending sales numbers in the past couple months, suggesting that some buyers have walked away between contract signing - when pending home sales are captured - and closing. That's expensive, but perhaps less expensive than buying a home whose price is falling rapidly."
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