Pending Home Sales Fell 7.3% In One Month And 11.3% In A Year, And The Chief Realtor Economist Says Buyers And Sellers Are Waiting For Rates That Could Be Topping Out

The number of homes that signed contracts fell off a cliff in September. And the nation’s top Realtor economist thinks mortgage rates may finally be near their peak.

A suburban brick and white house with a green lawn under a cloudy blue sky

The National Association of Realtors reported on October 20 that its Pending Home Sales Index fell 7.3% from August and 11.3% from a year earlier. The index stood at 66.0.

The full release is posted by the National Association of Realtors.

All Four Regions Slid, And The West Fell 15.0% In A Year

No part of the country escaped. Pending sales declined from the month before and from the year before in every region.

The Northeast fell 4.2% for the month and 9.4% for the year. The Midwest fell 6.5% and 8.7%. The South fell 8.2% and 12.0%.

The West had the steepest drops, down 9.2% for the month and 15.0% for the year.

“Mortgage Rates Could Be Topping Out”

NAR chief economist Lawrence Yun said market conditions weakened in September because mortgage rates rose quickly. His words on the future were more hopeful: “mortgage rates could be topping out.”

He pointed out that housing affordability is affected more by changes in mortgage rates than by job growth and rising incomes, which can support purchases.

Yun added that mortgage rates have risen far more than the Federal Reserve’s short-term rate hikes, and that energy prices and the inflation that follows remain highly uncertain.

Why Prices Are Not Crashing

Yun said the limited number of distressed properties is ensuring steady home prices. In plain words, few owners are being forced to sell, so there are few bargains created by trouble.

He also suggested that buyers and sellers may be holding back until mortgage rates move in a better direction.

A lot of owners have low-rate loans they are happy with. A lot of would-be buyers are waiting for a payment they can live with. The result is a market where fewer people are making moves.

Metros That Held Up Best

Among the 50 largest metro areas, a handful saw only small drops in pending sales from last year, according to Realtor.com Economics data cited by NAR.

Nashville, Tennessee, down 2.0%
Hartford, Connecticut, down 2.1%
San Francisco and Oakland, California, down 3.5%
San Jose, California, down 4.6%
Buffalo, New York, down 5.6%
Richmond, Virginia, down 5.8%
Austin, Texas, down 5.9%
Pittsburgh, Pennsylvania, down 6.2%
Memphis, down 6.3%
San Antonio, Texas, down 7.1%

What A Pending Sale Actually Is

A pending sale means a buyer and seller have signed a contract, but the deal has not closed yet. NAR calls the index a leading indicator, since those contracts turn into closed sales in the following weeks.

The index is based on about 40% of multiple listing service data each month. Contracts typically close within one or two months, though financing, inspections or appraisals can change the timing.

An index value of 100 equals the average contract activity in 2001, the first year NAR examined. That makes 66.0 a low number.

How To Find Out What Your Own Town Is Doing

National numbers are a weather report for the whole country. Your block can feel different.

Ask a local agent for the number of homes under contract in your zip code compared with the same month last year. Ask how many days homes are taking to sell and how many listings have had price cuts.

Your county recorder’s office and your local Realtor association often publish monthly figures, too. A few minutes of reading can tell you whether you are in Nashville’s camp or the West’s.

What It Means If You Are Selling This Winter

Fewer buyers means more competition for the ones who are out there. Sellers who treat the market as if it were last spring tend to sit.

Price the home by what has sold nearby in the last few weeks.
Be ready to offer a closing-cost credit or a rate buydown. Buyers are looking for ways to lower the payment.
Make the home easy to see. Clear the clutter, brighten the lights and keep the entry warm and tidy.
Do the small repairs now. Buyers who are cautious will use any problem to ask for more.

What It Means If You Are Buying

A slower market gives buyers more room to ask questions and take their time. With fewer people competing, a request for repairs or a price cut is more likely to be heard.

Get your financing pre-approved and shop several lenders. Even a small difference in the rate can change the payment by a meaningful amount over thirty years.

Do not skip the inspection to look like a stronger buyer. A cautious buyer who walks into a house with eyes open is better off than one who finds out later.

The Big Picture

The housing market has not frozen, but it has certainly slowed. A hard fall in contracts and mortgage rates that have climbed quickly leave many buyers on the sidelines.

Whether the market warms up depends on what rates do next, and nobody can promise that. For now, the best advice for most families is the same as always: know your budget, know your local market and make the move that fits your life, not the headline.

Willow and Hearth