Real estate agents had a lot of spare time on their hands in October. Pending home sales, a measure of sales contracts signed but not yet closed, fell 1.5% from an already low rate, according to the National Association of Realtors (NAR).
NAR says it is the lowest number for pending sales since the index was launched in 2001. That suggests that most buyers can’t handle the combination of high prices and high interest rates.
And interest rates were very high in October, around 8%. Asking prices for homes may have still been rising during the month.
"During October, mortgage rates were at their highest, and contract signings for existing homes were at their lowest in more than 20 years," said Lawrence Yun, NAR’s chief economist. "Recent weeks' successive declines in mortgage rates will help qualify more home buyers, but limited housing inventory is significantly preventing housing demand from fully being satisfied.
But can we expect the absence of buyers to increase the inventory of available homes, increasing competition among sellers and resulting in lower prices? The jury is still out on that one.
Steve Nicastro, the content team lead at Clever Real Estate, says inventory is still tight and it may be months before that changes. But he says it’s clear that there are fewer buyers in the market these days.
'Affordability still a significant concern'
“Affordability remains a significant concern and has priced many buyers out of the market,” Nicastro told ConsumerAffairs. Many potential buyers are either waiting for better conditions or have just given up on buying and are now renting instead.”
Shmuel Shayowitz, president and chief lending officer at Approved Funding, says the pending home sales number must be viewed in the context of mortgage rates. They were at 8% in October but are around 7.25% now. He thinks the decline in mortgage rates is a bigger factor for buyers than a slight build in inventory levels.
"For buyers, the fact that mortgage rates have been consistently improving since the end of October will have a favorable impact on those looking for homes,” he told us. “On a $400,000 loan, a drop of 1% from 8% to 7% can represent over $270 a month in savings. That will certainly start getting some people off the fence.”
Nicastro says the outlook for housing in 2024 is hard to predict, though he does expect some increase in housing inventory next year. How much, he says, depends on interest rates. Unless rates “plummet” he doesn’t expect current homeowners with a 3% mortgage rate to put their homes on the market.
Photo Credit: Consumer Affairs News Department Images
Posted: 2023-12-04 12:14:40