NAR’s Pending Home Sales Index rose to a reading of 72.6 in September. Pending homes sales mirrored the trend in new home sales, which posted a 12.3% increase in September. Regionally, the Northeast, Midwest and South had more transactions in September while the West posted a loss. Year over year, all four regions saw declining transactions.
“Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years,” Lawrence Yun, NAR chief economist said in a statement. “Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated.”
Overview of the different readings in September
New home sales data, released Wednesday, increased significantly in September. Compared to 2022, NAR expects the sale of new homes to grow by 4.5% in 2023, reaching an annual rate of 670,000. They project it to grow by another 19.4% in 2024, hitting 800,000 new homes. For those new construction units, the national median new home price is projected to drop by 5.9% in 2023, to $430,800, and increase by 3.5% in 2024, to $445,800.
“Because of homebuilders’ ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates. This underscores the importance of increased inventory in helping to get the overall housing market moving,” Yun added.
Meanwhile, existing home sales in September fell to their lowest level since 2010, Realtor.com Senior Economic Research Analyst Hannah Jones said in an emailed statement. They dropped below 4 million for the first time since October 2010, she added.
According to Jones, home sales activity should hover at a low level until the end of 2023 due to limited inventory and affordability challenges. NAR forecasts that existing-home sales will drop by 17.5% in 2023, reaching an annual rate of 4.15 million. In 2024, they should rise by 13.5% to reach an annual rate of 4.71 million.
For existing homes, NAR expects national median existing-home prices to remain stable in 2023. Lastly, they predict that housing starts will drop by 10.4% between 2022 and 2023, settling at 1.39 million. In 2024, it will rise to 1.48 million, posting a 6.5% gain, according to the NAR.
As the housing market tends to cool in the late fall, the number of homes going into contract is likely to decrease in the coming months, Kate Wood, home and mortgage expert at NerdWallet, said. That is especially true in a market where high prices are combined with high mortgage rates and a depleted inventory.