Economic Report: U.S. pending home sales stay near record low despite modest pickup in September

The numbers: U.S. pending home sales rebounded in September but remain near a record low as high mortgage rates and low inventory continue to hurt the real-estate sector.

Pending home sales rose 1.1% in September from the previous month, according to the monthly index released Thursday by the National Association of Realtors.

But pending home sales were still depressed on an annual basis due to the dearth of home listings. The September figure was the second-lowest reading since the NAR began tracking the data in 2001.

Transactions were down 11% from last year.

Nonetheless, the sales pace exceeded expectations on Wall Street. Economists were expecting pending home sales to fall 1.5% in September.

Pending home sales reflect transactions where the contract has been signed for the sale of an existing home, but the sale has not yet closed. Economists view it as an indicator of the direction of existing-home sales in subsequent months.

The NAR also released an updated forecast for existing-home sales on Thursday. The group expects sales to fall 17.5% in 2023 to a pace of 4.15 million, which will be the slowest pace since 2008. Yet due to low inventory, the median home price will increase by 0.1% in 2023, the NAR said, to $386,700.

The group expects home sales to rebound in 2024, rising 13.5% to a rate of 4.71 million. Home prices are expected to rise 0.7% next year, to $389,500. 

The NAR also expects the 30-year mortgage rate to fall to 6.9% in 2023 and 6.3% in 2024. The 30-year was averaging 7.98% as of Wednesday, according to Mortgage News Daily.

Big picture: The U.S. housing market is dealing with problems on both the demand and supply sides, but the NAR seems confident that the sector will recover in the new year.

At present, not only are rates high enough to discourage home buyers, the lack of inventory is also making homes more expensive, which further spooks buyers. The NAR expects the pace of existing-home sales to fall to the slowest in 15 years, when the U.S. was in the midst of a recession caused by the subprime-lending crisis.

What the realtors said: “Because of home builders’ ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates,” NAR Chief Economist Lawrence Yun said. “This underscores the importance of increased inventory in helping to get the overall housing market moving.”

Market reaction: Stocks
DJIA

SPX
were mixed in early trading on Thursday. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
rose above 4.9%.

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