"Many potential homebuyers are choosing to wait and see where the housing market will end up".
Pending home sales in September tumbled for the fourth month in a row as homebuyers continued to lose purchasing power due to skyrocketing mortgage rates.
Home sales based on contract signings fell 10.2% month over month and 31% year over year in September, according to the National Association of Realtors. NAR’s Pending Home Sales Index (PHSI) was down a reading of 79.5.
“Persistent inflation has proven quite harmful to the housing market,” said NAR chief economist Lawrence Yun. “The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers.”
Yun added that new home listings declined annually since many homeowners are unwilling to give up the ultra-low, 3% mortgage rates they locked in prior to this year.
“The new normal for mortgage rates could be around 7% for a while,” Yun said. “On a $300,000 loan, that translates to a typical monthly mortgage payment of nearly $2,000, compared to $1,265 just one year ago – a difference of more than $700 per month. Only when inflation is tamed will mortgage rates retreat and boost home purchasing power for buyers.”
Last week, the average 30-year fixed-rate mortgage hit 7.08% – the highest level in over two decades.
“As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month,” said Freddie Mac chief economist Sam Khater. “In fact, many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward.”