Moderate rise in home sales signals market resilience
Pending home sales have increased for the third consecutive month against a backdrop of high mortgage rates and tight inventory.
The National Association of REALTORS’ September Pending Home Sales Index (PHSI) rose 1.1% month over month to 72.6 in September, yet pending transactions declined by 11% year over year.
“Pending home sales grew modestly in September but tumbled year over year despite that slight increase,” said Kate Wood, home and mortgage expert at NerdWallet.
She pointed to the exacerbating effects of constrained inventory and high prices, worsened by rising mortgage rates. “With mortgage interest rates heading even higher and the traditional homebuying season ending, the number of homes going into contract is likely to decrease further in coming months,” Wood added.
NAR forecasted a mixed outlook for the housing market. The 30-year fixed mortgage rate is expected to average 6.9% in 2023, with a slight decrease to 6.3% in 2024. The unemployment rate is predicted to lower to 3.7% in 2023 before rising to 4.1% in 2024.
Existing home sales are projected to decrease by 17.5% in 2023 and then rise by 13.5% in 2024. Median existing-home prices are expected to remain stable at $386,700 this year before increasing projected by 0.7% next year to $389,500.
NAR chief economist Lawrence Yun highlighted the potential role of new home sales in revitalizing the market. The new home sales market continued to grow beyond expectations, with sales spiking 12.3% in September.
“Because of homebuilders’ ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates,” Yun said, underscoring the importance of inventory in stimulating the overall housing market.
NAR anticipates newly constructed home sales to increase by 4.5% in 2023 to 670,000, thanks to additional inventory, with a further increase of 19.4% to 800,000 in 2024.
Regionally, the Northeast (+0.8% month over month), Midwest (+4.1%), and South (+0.7%) saw monthly gains in transactions, while the West (-1.8%) experienced a loss. Yun remains optimistic, expecting sales to turn positive by early next year, particularly in affordable regions and fast job-creating markets like the Midwest and South.
“Sales are expected to turn positive by early next year, with affordable regions and fast job-creating markets in better positions to recover, led by the Midwest and South,” added Yun.
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