The number of homes under contract fell again last month as high mortgage rates and home prices weakened buyer demand.
Pending home sales, a forward-looking market indicator, declined for the fifth consecutive month in October, falling by 4.6 percent, according to the National Association of Realtors’ (NAR) Pending Home Sales Index. The number of pending transactions decreased year-over-year by 37 percent.
“October was a difficult month for home buyers as they faced 20-year-high mortgage rates,” NAR Chief Economist Lawrence Yun said in a statement. “The West region, in particular, suffered from the combination of high interest rates and expensive home prices. Only the Midwest squeaked out a gain.”
Persistently high home prices and volatile mortgage rates fueled by the Federal Reserve’s fight with inflation continue to push buyers to the sidelines.
Meanwhile, recent data shows that the median sales price of new single-family homes sold in October was $493,000, while the average sales price was $544,000.
Mortgage rates have more than doubled since last year and have shot up considerably since March when the U.S. central bank first raised interest rates.
Yet mortgage rates fell last week, and some economists expect the Fed to slow interest rate hikes as the economy weakens.
“The 30-year fixed mortgage rate decreased to 6.49 percent and has now fallen 57 basis points over the past four weeks. Additionally, mortgage rates for most other loan types declined,” Joel Kan, Vice President and Deputy Chief Economist for the Mortgage Bankers Association said in a statement.
“The economy here and abroad is weakening, which should lead to slower inflation and allow the Fed to slow the pace of rate hikes,” Kan added.
And Yun said the falling mortgage rates could lead buyers back into the market in the coming months.
“The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”