US pending home sales jump the most in more than four years, NAR says

U.S. Home Sales Surge in September

(Reuters) – Contracts to purchase previously owned homes in the U.S. experienced the largest increase in over four years in September, driven by attractive interest rates and a greater inventory of available properties.

The National Association of Realtors (NAR) reported that its Pending Home Sales Index, which is based on signed contracts, rose by 7.4% last month, reaching 75.8 – the highest level since March, up from 70.6 in August. Economists surveyed by Reuters had predicted a 1.0% increase after a 0.6% rise in August from a record low in July.

This month-over-month increase marked the biggest improvement since a 14.9% gain in June 2020. Year-over-year, the national sales rate increased by 2.6%, the largest rise since May 2021.

Pending home sales saw increases in all four regions month-over-month, and year-over-year there were gains in the Northeast and West, with the Midwest and South remaining unchanged.

According to Lawrence Yun, NAR's chief economist, "Contract signings rose across all regions of the country as buyers took advantage of the combination of lower mortgage rates in late summer and more inventory choices." He anticipates further growth if the economy continues to add jobs, inventory increases, and mortgage rates stabilize.

However, mortgage rates have risen since September, following the Federal Reserve's anticipated series of interest rate cuts. Strong economic data post-Fed's September 18 half-percentage-point cut has led to an uptick in yields on U.S. Treasury securities, which inform mortgage rates.

By the end of September, the 30-year fixed mortgage rate was just above 6%, the lowest in over two years, which contributed to increased contract signings. Nonetheless, rates have climbed more than half a point since then, reaching levels not seen since late July.

Despite this, Yun remains optimistic about home sales prospects for the next two years. He predicts a rise in existing-home sales to 4.47 million in 2025 and over 5 million in 2026, following two years of stagnation in sales.

Yun forecasts that the median existing-home price will rise to $410,700 in 2025 (up from $403,400 in 2024) and to $420,000 in 2026. The annual 30-year fixed mortgage rate is expected to decrease to 5.9% in 2025 before increasing to 6.1% in 2026.