Contracts to buy existing homes stay flat as mortgage payments soften
PENDING US home sales remained unchanged in November, data released on Thursday (Dec 28) showed, signalling traffic from prospective buyers is slow to recover despite interest rates easing on the most common type of home loan.
An index gauging contracts to buy existing homes measured at 71.6 in November, level with October’s revised reading, the National Association of Realtors (NAR) said. Economists polled by Reuters expected an increase of 1 per cent.
On a yearly basis, pending home sales have declined 5.2 per cent.
“Although declining mortgage rates did not induce more homebuyers to submit formal contracts in November, it has sparked a surge in interest, as evidenced by a higher number of lockbox openings,” said Lawrence Yun, chief economist at the NAR. “With mortgage rates falling further in December – leading to savings of around US$300 per month from the recent cyclical peak in rates – home sales will improve in 2024.”
Mortgage interest rates climbed to nearly 8 per cent in October, coinciding with the lowest reading of pending home sales since the index was created in 2001. After the Federal Reserve left its benchmark policy rate unchanged again in November, the average 30-year fixed-rate mortgage fell to 6.67 per cent for the week ended Dec 21, according to Freddie Mac.
Existing home sales fell precipitously this year from 2022 as high mortgage rates encouraged homeowners locked into cheaper rates to keep their homes, shortening inventory and eroding buyer traffic.
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The West and Northeast regions experienced the biggest gain in contracts signed, by 4.2 per cent and 0.8 per cent respectively. Pending home sales in the South fell by 2.3 per cent. REUTERS
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