Pending home sales post biggest annual increase since 2015
Contract signings to purchase previously owned homes posted the largest annual increase in four years, signaling lower mortgage rates are reviving interest from buyers.
The National Association of Realtors' index of pending home sales increased 6.3% in September from a year earlier on an unadjusted basis, the biggest gain since August 2015, according to data released Tuesday. On a monthly adjusted basis, contracts rose 1.5%, exceeding the median forecast in Bloomberg's survey for a gain of 0.9%.
The result indicates the housing market is regaining traction after a separate report showed contract closings fell 2.2% in September. A decline in mortgage rates — helped by Federal Reserve interest-rate reductions — probably helped return residential investment to growth in the third quarter for the first time in more than a year, though housing is still relatively subdued compared with previous expansions.
At the same time, with mortgage costs well below levels from earlier this year and unemployment at a half-century low, the door remains open for further growth. A separate report Tuesday showed home prices in 20 U.S. cities declined in August from the prior month for the first time in a year, reflecting moderation in some once-hot real estate markets.
Pending home sales are often considered a leading indicator of existing-home purchases and a measure of the health of the residential real estate market in coming months.
"Even though home prices are rising faster than income, national buying power has increased" with lower interest rates, Lawrence Yun, NAR's chief economist, said in a statement. "But home prices are rising too fast because of insufficient inventory."
The monthly gains in contracts were concentrated in the Midwest and South, while the West and Northeast recorded declines.
Forecasts for monthly pending home sales in the Bloomberg survey of economists ranged from a 0.7% decline to a 3% increase.