NAR Chief Economist Yun says “increased housing inventory and better interest rates are essential” for a real estate market rebound.
WASHINGTON – Pending home sales slid 7.1% in August, according to the National Association of Realtors® (NAR). All four U.S. regions posted monthly losses and year-over-year transaction declines.
“Mortgage rates have been rising above 7% since August, which has diminished the pool of homebuyers,” says Lawrence Yun, NAR chief economist. “Some would-be homebuyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets.”
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – sank 7.1% to 71.8 in August. Year over year, pending transactions fell by 18.7%. An index of 100 is equal to the level of contract activity in 2001.
“It’s clear that increased housing inventory and better interest rates are essential to revive the housing market,” adds Yun.
Pending home sales regional breakdown: The Northeast PHSI declined 0.9% month-to-month to 62.6, a drop of 18.2% year-to-year. The Midwest index dropped 7.0% to 71.3, down 19.1% from one year ago.
The South PHSI fell 9.1% to 86.5 in August, down 17.6% from the prior year. The West index retreated 7.7% to 56.3, sinking 21.4% from August 2022.
“The Federal Reserve must consider the sharply decelerating rent growth in its consideration of future monetary policy,” says Yun. “There is no need to raise interest rates. Moreover, the government shutdown will disrupt some home sales in the short run due to the lack of flood insurance or delays in government-backed mortgage issuance.”
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