Mortgage rate surge triggers historic drop in pending sales in October.

​With mortgage rates going off the charts, pending home sales fell to their lowest level in over two decades, according to the National Association of Realtors (NAR).
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The number of contract signings for existing homes dropped 1.5% month over month and 8.5% year over year in October, bringing NAR's Pending Home Sales Index (PHSI) to 71.4 – the lowest since the trade association began keeping records in 2001.

Housing industry experts attributed this slump to October's peak mortgage rates.

"During October, mortgage rates were at their highest, and contract signings for existing homes were at their lowest in more than 20 years," NAR chief economist Lawrence Yun said in the PHSI report.

"Buyers and sellers are very mortgage-rate sensitive. Higher mortgage rates have had a dual impact on the housing market – reducing affordability for potential buyers and keeping sellers rate-locked in," said Odeta Kushi, deputy chief economist for First American.

Kate Wood, home and mortgage expert at NerdWallet, said the decline in pending sales may reverse as mortgage rates eased off throughout November.

"But given that inventory levels remain low and the real estate market generally slows heading into the holidays, pending home sales might not bounce right back from this low point," Wood noted.

"While there remains quite a bit of demand for homes on the sidelines, you can't buy what's not for sale, even if you can afford it," Kushi added.

"Home sales are rising in places where more inventory is available," Yun said. "Sales for properties priced above $750,000 were higher than a year ago because there is more inventory at this price point than what we saw last October. Additionally, newly built home sales are up 4.5% year-to-date due to homebuilders' ability to create more inventory. It is vital that we continue to focus on boosting housing supply by all means in all corners of the country over the coming months."

The regional breakdown of the PHSI presented a mixed picture. The Northeast experienced a 2.7% increase to 64.8 but still fell 6.5% from October 2022. The Midwest saw a slight 0.4% contraction to 73.8, a 10.3% drop year-over-year. The South's index declined 1.9% to 85.6, down 7.1% from the previous year, while the West faced a sharper 6.0% decline to 51.8, a 10.8% decrease from October 2022.
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"Buyers continue to struggle with low inventory and affordability in many markets," said Keller Williams chief economist Ruben Gonzales. "Inventory levels are showing signs of increasing, but this varies by region. The Gulf Coast and Mountain West regions have the highest inventory levels, and the Northeast currently has the lowest. This year's pause in price growth created a window of opportunity for buyers with cash or large down payments, but that window now appears to be closing."

Fines will go into relief fund.

Bank of America Corp. agreed to pay $12 million in fines for submitting false mortgage-lending information to the US government, regulators said.

From early 2016 through late 2020, some of the bank’s loan officers failed to ask mortgage applicants for their race, ethnicity and sex, as required under federal law, and then falsely recorded that the customers declined to provide the information, the Consumer Financial Protection Bureau said in a statement Tuesday. The fines will go into the bureau’s victim-relief fund, according to a consent order.

“Bank of America violated a federal law that thousands of mortgage lenders have routinely followed for decades,” CFPB Director Rohit Chopra said in the statement. “It is illegal to report false information to federal regulators, and we will be taking additional steps to ensure that Bank of America stops breaking the law.”

Bank of America, the second-largest US bank by assets, said in an emailed statement that it “properly collected demographic data in more than 99% of applications in the years reviewed by the CFPB and consistently had lower percentages of applicants not disclosing their race compared to annual industry averages.”

After receiving one complaint in 2020, Bank of America conducted a review and notified the government, which prompted the inquiry from regulators, the Charlotte North Carolina-based lender said. It then took “additional steps in 2020 and 2021 to enhance our monitoring and training to ensure employees ask applicants for required racial, ethnic and gender information,” the bank said in the statement, noting that the data collection issue had no impact on applications.

The company didn’t admit to or deny the allegations as part of the settlement.

The regulatory penalty from the CFPB follows a recent $250 million fine in July over extra fees and unauthorized costs to consumers. A year earlier, the lender was fined $225 million for unfair and deceptive practices related to a prepaid-card program to distribute unemployment insurance and other public-benefit payments during the pandemic. It was also ordered last year to pay a $10 million penalty and repay fees that the lender charged customers when garnishing wages.

As of June, Bank of America was the nation’s 17th-largest home-loan provider in terms of volume, according to Inside Mortgage Finance data. The CFPB has targeted a bevy of other mortgage lenders in enforcement actions involving alleged errors in data reporting. The agency sued Freedom Mortgage Corp. in October, alleging the home-loan originator and servicer intentionally misreported mortgage data.
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The agency uses annually submitted Home Mortgage Disclosure Act data on the race, income and other demographics of home-loan applicants to monitor mortgage providers for discrimination. Much of the data is also made publicly available.