By (Reuters) – Contracts to buy U.S. previously owned homes jumped by the most in more than four years in September on a mix of more attractive interest rates and improving inventory of properties for sale.
The National Association of Realtors (NAR) said on Wednesday its Pending Home Sales Index, based on signed contracts, rose 7.4% last month to 75.8 – the highest since March – from 70.6 in August. Economists polled by Reuters had forecast contracts, which become sales after a month or two, would rise 1.0% after increasing 0.6% in August from a record low in July.
September’s month-on-month increase was the largest since June 2020’s 14.9% gain, while on a year-over-year basis the national sales rate was up 2.6% – the biggest jump since May 2021.
Pending home sales rose month-over-month in all four regions, and year-over-year they rose in the Northeast and West and were unchanged in the Midwest and South.
“Contract signings rose across all regions of the country as buyers took advantage of the combination of lower mortgage rates in late summer and more inventory choices,” said Lawrence Yun, the NAR’s chief economist. “Further gains are expected if the economy continues to add jobs, inventory levels grow, and mortgage rates hold steady.”
To be sure, though, mortgage rates have climbed since September even though the Federal Reserve delivered the first of what is expected to be a run of interest rate cuts over the next year or so. A string of stronger-than-expected economic data since the Fed’s Sept. 18 half-percentage-point cut has helped to drive up the yields on the U.S. Treasury securities that serve as a benchmark for mortgage rates.
The rate on 30-year-fixed rate mortgages near the end of September had been just above 6% and the lowest in more than two years, helping lift contract signings last month. Since then, though, it has climbed by more than half a point to the highest since late July.
Nonetheless, Yun said the home sales outlook should brighten over the next two years.
“After two years of sluggish home sales in 2023 and 2024, existing-home sales are forecasted to rise to 4.47 million in 2025 and more than 5 million in 2026,” Yun said. “During the next two years, expect a slower rate of growth in home prices that’s roughly in line with the consumer price index because of additional supply reaching the market.”
The median existing-home price will rise to $410,700 in 2025, from a forecast for 2024 of $403,400, and to $420,000 in 2026, Yun said alongside updated NAR projections. The annual 30-year fixed mortgage rate will slide to 5.9% in 2025 but then move higher to 6.1% in 2026.