- Pending home sales collapsed 10.2% in September, much higher than the 3.8% drop projected.
- This occurs due to the increase in mortgages and goes hand in hand with the increase in interest rates by the Fed.
- This data is very important since an accumulation of inventory could drive down the price of housing, which would have a favorable impact on a significant drop in inflation.
Data released Friday revealed that the National Association of Realtors Pending Home Sales Index fell 31% in September compared to the same month a year earlier.
Additionally, pending home sales sank 10.2%, much more than the 3.8% drop estimated by the Econoday consensus.
“Persistent inflation has proven to be quite damaging to the housing market. The Federal Reserve had to dramatically raise interest rates to stifle inflation, resulting in far fewer buyers and even fewer sellers.”
NAR Chief Economist Lawrence Yun.
Precisely in September, the Federal Reserve increased interest rates by 75 basis points for the third consecutive month, which meant the most aggressive increase since 1994, since it went from 0% to 3.25%. On the other hand, an equal increase (75 points) is expected in November.
These data are extremely important since fewer sales produce an accumulation of inventory, which could drive down the price of homes, which would have a favorable impact on a significant drop in inflation.
The average rate for a 30-year fixed mortgage topped 7% for the first time in 20 years this week, according to Freddie Mac.
“For many buyers, especially first-time buyers, higher borrowing costs mean a home purchase may be postponed until next year. Prices have been falling since their summer peak, but not fast enough to offset the much higher rates.
George Ratiu, Senior Economist at Realtor.com.
It is worth mentioning that 64,000 home purchase deals fell through in August, marking the second consecutive month that cancellations have exceeded 15%, according to real estate brokerage Redfin. And 1 in 5 listings have seen their prices reduced, Ratiu noted.
