According to the National Association of Realtors, pending home sales in November were flat compared to October and 5.2% lower than November last year.
The value, based on contracts signed during the month, is a forward-looking indicator of closed sales as well as the most up-to-date insight into the minds of potential homebuyers.
Mortgage interest rates play a central role in this report. According to Mortgage News Daily, the average interest rate on 30-year fixed-rate mortgages rose over 8% in mid-October before falling sharply to 7.5% in the first week of November. It ended the month at around 7.25%.
Analysts had expected the decline to lead to a slight increase in pending sales, but that apparently wasn't enough given high home prices and tight supply.
“Although falling mortgage rates did not prompt more homebuyers to submit formal contracts in November, it did spark a surge in interest, reflected in a higher number of lock box openings,” said Lawrence Yun, NAR chief economist.
Regionally, pending sales increased 0.8% month-over-month in the Northeast and 0.5% in the Midwest. In the West – where prices are highest and a drop in mortgage rates would have the biggest impact – sales posted a stronger gain of 4.2% and fell 2.3% in the South. Pending sales in November were lower across all regions than the same month in 2022.
Mortgage rates are now stable in the mid-6 percent range, but the supply of homes for sale is still very low. Builders are increasing production, but new homes come at a higher price. The prices for existing properties continue to rise.
“As mortgage rates continue to fall in December – resulting in savings of around $300 per month from the recent cyclical peak in rates – home sales will improve in 2024,” Yun added.
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