The Pending Home Sales Index, representing the number of homes that went under contract, rose 1.1 percent between September and August to a measure of 72.6, according to NAR — 11 percent below where they sat in September 2022.
“Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years,” Lawrence Yun, NAR’s chief economist said in a statement. “Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated.”
Sales in the Northeast increased 0.8 percent month over month, a loss of 12.7 percent from September 2022. The Midwest Pending Home Sales Index grew 4.1 percent month over month and decreased 9.2 percent year over year, while the South index rose 0.7 percent from September and fell 10.7 percent from the prior year. The West, meanwhile, saw pending sales decline 1.8 percent from the previous month and 12.9 percent from the previous year.
“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,” Yun said.
With mortgage rates currently close to 8 percent, NAR forecasted that the 30-year fixed mortgage rate will average 6.9 percent for 2023 and decrease to an average of 6.3 percent in 2024. It also predicted existing home sales will decrease 17.5 percent throughout 2023, settling at 4.15 million, before rising 13.5 percent, to 4.71 million in 2024.
September also saw new home sales jump despite the unrelenting climb of mortgage interest rates, increasing 12.3 percent from October. Sales of new homes have performed better than expected throughout 2023 as buyers turn to them due to the impact of the “lock-in effect” on the existing-home market.
“Because of homebuilders’ ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates. This underscores the importance of increased inventory in helping to get the overall housing market moving,” said Yun.
NAR predicts newly constructed home sales will grow from last year by 4.5 percent in 2023 to 670,000, due to additional inventory.