Contracts signed for existing homes in September jumped 7.4% compared to August, according to the National Association of Realtors. Analysts had expected a gain of 1%.
These so-called pending sales were at the highest level since March and 2.6% higher than in September of last year.
Since pending sales are based on signed contracts, which represent people shopping during the month, it is the most recent indicator of buyer demand. It also shows how sensitive today's buyers are to mortgage rates.
The average interest rate on a 30-year fixed mortgage declined throughout August and recently touched a low of 6.11% on September 11, according to Mortgage News Daily. It stayed around that level for the rest of the month before rising in October. Now it is just over 7%.
“Contract signings rose in all regions of the country as buyers benefited from the combination of lower late-summer mortgage rates and more inventory options,” Lawrence Yun, chief economist at the brokerage, said in a statement. “Further gains are expected if the economy continues to add jobs, inventory levels grow, and mortgage rates hold steady.”
Regionally pending sales were higher year over year in the Northeast and West and flat in the Midwest and South. Overall, gains were greater in the West, where home prices are highest and buyers would stand to benefit most from a small drop in interest rates.
With prices now rising, affordability is taking a hit again. However, mortgage demand from homebuyers saw gains last week and was 10% higher than the same week a year ago, according to the Mortgage Bankers Association. Mortgage demand levels remain historically low, and sales remain high as well.
“With interest rates back at 7%, the pending activity rebound is likely to be short-lived and unlikely to be enough to help 2024 home sales exceed 2023 levels,” said Selma Heap, chief economist at CoreLogic.
