Tuesday, October 31, 2023 / by Richard Eimers
It’s a slight gain, but NAR’s chief economist says pending sales “remain at historically low levels.” Year-over-year, pending transactions were down 11%.
WASHINGTON – Pending home sales rose 1.1% in September, according to the National Association of Realtors® (NAR). Three of the four regions tracked – the Northeast, Midwest and South – posted monthly gains in transactions while the West saw a loss. Year-to-year, though, all four regions had transaction declines.
“Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years,” says NAR Chief Economist Lawrence Yun. “Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated.”
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – rose 1.1% to 72.6 in September. Year over year, pending transactions declined 11%. An index of 100 is equal to the level of contract activity in 2001.
NAR predicts that mortgage rates will see a slight decline in 2024. It foresees a 30-year fixed mortgage averaging 6.9% for 2023 and decrease to an average of 6.3% in 2024. It also sees the unemployment rate lowering to 3.7% for all of 2023 before increasing to 4.1% in 2024.
For 2023, NAR predicts that existing-home sales will decrease 17.5%, settling at 4.15 million by the end of the year. In 2024, they’ll increase 13.5%, to 4.71 million.
Compared to last year, national median existing-home prices are projected to remain stable in 2023, edging higher by 0.1% to $386,700 before increasing by 0.7% next year, to $389,500.
Housing starts are expected to drop 10.4% from 2022 to 2023, to 1.39 million, before rising to 1.48 million (6.5%) in 2024.
“Because of homebuilders’ ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates,” says Yun. “This underscores the importance of increased inventory in helping to get the overall housing market moving.”
NAR expects newly constructed home sales will grow from last year by 4.5% in 2023, to 670,000 because of additional inventory, and increase by another 19.4% in 2024 to 800,000. The national median new home price will drop by 5.9% this year, to $430,800, and improve by 3.5% next year, to $445,800.
Pending home sales regional breakdown: The Northeast PHSI increased 0.8% month-to-month to 63.1, a year-to-year loss of 12.7% from September 2022. The Midwest index expanded 4.1% to 74.3 in September, down 9.2% from one year ago.
The South PHSI rose 0.7% to 87.1 in September, down 10.7% from the prior year. The West index declined 1.8% in September to 55.3, dropping 12.9% from September 2022.
“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,” says Yun.
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