US pending home sales fall at twice the expected rate in September, NAR says

The National Association of Realtors' Pending Home Sales Index slumped at a month-on-month pace of 10.2% in September, marking a fourth consecutive monthly decline, to reach 79.5.

Economists had been anticipating a drop of 5.3%.

"Persistent inflation has proven quite harmful to the housing market," said NAR chief economist Lawrence Yun.

"The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers."

Linked to the latter, Yun explained that new home listings had now fallen below theuir year earlier level.

He linked that to the fact that many homeowners preferred to hold onto the rock-bottom 3% mortgage rates locked in before 2022 and that the 'new normal' for mortgage rates might remain around 7% for a while.

"The new normal for mortgage rates could be around 7% for a while," Yun added. "On a $300,000 loan, that translates to a typical monthly mortgage payment of nearly $2,000, compared to $1,265 just one year ago – a difference of more than $700 per month.

"Only when inflation is tamed will mortgage rates retreat and boost home purchasing power for buyers."

"The decline in September pending home sales is no surprise given the spike in mortgage rates in September following a short-lived decline in rates in July and August," said Nancy Vanden Houten, Us economist at Oxford Economics.

"Rates have increased another 40bps in October, which will further erode homebuying affordability, which fell sharply in Q3. Home price growth has slowed significantly, but the moderation to-date is far from enough to offset the increase in mortgage payments caused by the spike in mortgage rates."