Key Highlights
- Pending home sales dropped for the fourth straight month, down 10.2% from August.
- Month-over-month, contract signings pulled back in all four major U.S. regions.
- Pending sales decreased in all regions compared to one year ago.
Pending home sales trailed off for the fourth consecutive month in September, according to the National Association of Realtors. All four major regions recorded month-over-month and year-over-year declines in transactions.
The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, slumped 10.2% to 79.5 in September. Year-over-year, pending transactions slid by 31.0%. An index of 100 is equal to the level of contract activity in 2001.
“Persistent inflation has proven quite harmful to the housing market,” said NAR Chief Economist Lawrence Yun. “The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers.”
Yun noted that new home listings are down compared to one year ago since many homeowners are unwilling to give up the rock-bottom, 3% mortgage rates that they locked in prior to this year.
“The new normal for mortgage rates could be around 7% for a while,” Yun added. “On a $300,000 loan, that translates to a typical monthly mortgage payment of nearly $2,000, compared to $1,265 just one year ago – a difference of more than $700 per month. Only when inflation is tamed will mortgage rates retreat and boost home purchasing power for buyers.”
Pending Home Sales Regional Breakdown
The Northeast PHSI descended 16.2% from last month to 64.2, a decline of 30.1% from September 2021. The Midwest index retracted 8.8% to 80.7 in September, down 26.7% from one year ago.
The South PHSI faded 8.1% to 97.0 in September, a drop of 30.0% from the prior year. The West index slipped by 11.7% in September to 62.7, down 38.7% from September 2021.
The National Association of Realtors® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.
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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.
The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
NOTE: Existing-Home Sales for October will be reported on November 18. The next Pending Home Sales Index will be on November 30. All release times are 10 a.m. Eastern.
Information about NAR is available at nar.realtor. This and other news releases are posted in the newsroom at nar.realtor/newsroom. Statistical data in this release, as well as other tables and surveys, are posted in the “Research and Statistics” tab.
InfographicPending Home Sales: September 2022