U.S. pending home sales hit record low in September as mortgage rates climb
Higher borrowing costs are pushing more U.S. homebuyers to the sidelines, deepening the housing market's slowdown in September. The drop in contract signings points to weaker existing home sales in the coming months because pending sales typically close after one or two months.
Highlights
- U.S. pending home sales index fell 7.3% in September to 66.0, the lowest since 2001, missing economist expectations of a 0.5% drop.
- Pending sales declined across all four U.S. regions and are down 11.3% year-over-year as reported by the National Association of Realtors.
- Average 30-year fixed mortgage rates reached 7.40% last week, the highest in nearly three years, significantly pressuring housing affordability and demand.
September contracts post steep nationwide decline
As reported by Reuters, citing the National Association of Realtors, its pending home sales index drops 7.3% in September to 66.0, the lowest reading since the series begins in 2001.Contracts to buy previously owned homes fall across all four U.S. regions, and pending home sales are down 11.3% from a year earlier. Economists polled by Reuters had expected a much smaller 0.5% decline in contracts.
Lawrence Yun, the NAR's chief economist, says market conditions weaken in September because mortgage rates rise rapidly.
Rising financing costs add pressure to housing demand
Mortgage rates continue to accelerate in recent weeks, with Freddie Mac data showing the average rate on a 30-year fixed mortgage at 7.40% last week, the highest level in nearly three years.Those higher borrowing costs are weighing on affordability and depressing demand for home purchases. Treasury yield moves, linked in part to inflation concerns tied to the U.S.-Israeli war with Iran, are also feeding through to mortgage rates and adding pressure to the housing sector.
In our earlier coverage of rising long-term Treasury yields, we noted that borrowing costs above 5% were filtering through to the wider economy—lifting mortgage rates and adding strain to the housing market. The article also explained how higher yields amplify the U.S. fiscal burden as deficits near $2 trillion, with political gridlock limiting the prospects for near-term deficit reduction.
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