Report follows news of decline in homebuyer affordability
Contract signings to buy previously owned homes declined to their lowest level since April 2020, according to new data from the National Association of Realtors (NAR).
A decrease of 7.1% in NAR’s Pending Home Sales Index to 71.8 has been noted on the back of sky-high mortgage rates. According to Bloomberg, the decline was larger than all estimates in a Bloomberg survey of economists. Pending sales were down 18.7% year over year.
“Some would-be home buyers are taking a pause and readjusting their expectations,” Lawrence Yun, chief economist at NAR, said in a statement. “It’s clear that increased housing inventory and better interest rates are essential to revive the housing market.”
High mortgage rates continue to impede housing market
Homebuyer affordability declined in August. The average mortgage payment increased to $2,170 in August, up 18% year over year, according to data from the Mortgage Bankers Association.
Concurrently, existing home sales decreased slightly by 0.7% in August to a seasonally adjusted annual rate of 4.04 million units. These are counted at the closing of a contract. Sales fell in the South and West. They increased in the Midwest and were unchanged in the Northeast.
Economists describe the current mortgage rates as being at a 20-year high. A Reuters report noted the housing market had shown signs of stabilizing following the Federal Reserve’s aggressive monetary policy tightening. However, elevated mortgage rates have put pressure on the market. Homebuilder confidence declined to a five-month low in September, while housing starts in August dipped to their lowest levels since mid-2020.
Fueling the pressure on the market is the rise in US Treasury yields amid worries that surging oil prices could hinder the Fed’s fight against inflation.
The US central bank left its benchmark overnight interest rate unchanged in the 5.25%-5.50% range earlier this month. However, another hike is expected by year end and monetary policy is anticipated to stay tight through 2024.
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