Pending home sales have grown for the second consecutive month—leaping 7.4% and reaching the highest level seen since March—due to lower mortgage rates and rising inventory. The rise, however, may be short lived, according to some economists.
NAR’s September Pending Home Sales Index jumped to 75.8, following August’s minor rise of 0.6% and nearing March’s high of 78.3 (an index of 100 is equal to the level of contract activity in 2001). Year-over-year, pending transactions have grown 2.6%.
“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,” commented NAR Chief Economist Lawrence Yun. “Further gains are expected if the economy continues to add jobs, inventory levels grow, and mortgage rates hold steady.”
CoreLogic Chief Economist Dr. Selma Hepp agreed with Yun’s assessment, adding that lower mortgage rates “helped boost housing demand and provide some much-needed consumer optimism, particularly for the purchase of big items.”
She noted, however, that with rates recently rising again, “the rebound in pending activity is likely short lived and is unlikely to be enough to help 2024 home sales exceed 2023 levels.”
Economists such as Realtor.com®’s Senior Economic Research Analyst Hannah Jones have stated that this Friday’s Jobs report will be “key in informing mortgage rates in the short term.
“If the employment gains deviate from expectations in either direction, mortgage rates are likely to swing accordingly,” she said. “The Fed meeting the following week is another potential source of mortgage rate volatility. Chair Powell’s comments about the future rate path is likely to have a bigger impact on mortgage rates than the rate change itself, assuming the market is correct about a 25 basis point rate reduction.”
Regionally, all four major regions experienced month-over-month transaction gains. The Northeast grew 6.5% to 65.6, up 3.3% from September 2023. The Midwest grew 7.1% to 75, identical to the previous year. The South improved 6.7% to 89, unchanged from a year ago. The West grew by 9.8% to 64, up 12.3% from September 2023.
Year-over-year, the Northeast and West registered increases while sales remained steady in the Midwest and South.
Looking forward to the next two years, Yun said he expects to see slower home price appreciation and a corresponding increase in sales.
“After two years of sluggish home sales in 2023 and 2024, existing-home sales are forecasted to rise to 4.47 million in 2025 and more than 5 million in 2026,” Yun continued. “During the next two years, expect a slower rate of growth in home prices that’s roughly in line with the consumer price index because of additional supply reaching the market.”
Yun also predicted the median existing-home price will rise to $410,700 in 2025 and to $420,000 in 2026. The annual 30-year fixed mortgage rate will slide to 5.9% in 2025 before moving higher to 6.1% in 2026.
View NAR’s Economic and Housing Outlook for more information.
