Pending home sales fell 10% in September, much worse than expected

The National Association of Realtors reported that pending home sales dropped by 10.2% in September from the previous month.

The economists had predicted a decline. The sales were down by a third.

The lowest level on the pending sales index since June 2010 is the result of the Covid outbreak.

The first two years of the Pandemic were marked by record low mortgage rates. According to Mortgage News Daily, the average rate on the 30-year fixed mortgage was 3% at the beginning of the year, but then went up to 6.05% in June. When these contracts were signed in September, it began rising again after pulling back a bit.

The housing market has been hurt by persistent inflation. The Federal Reserve has had to raise interest rates to combat inflation, which has resulted in a reduction in buyers and sellers.

Homeowners are unwilling to give up their record-low interest rates to trade up to a much higher one is the reason for the drop in mortgage demand. The monthly payment on a median priced home with a 20% down payment is $1,000 higher than it was in January because of the increase in rates.

With wages falling behind on account of inflation and rates rising, buyers' purchasing power has been reduced.

We can expect interest rates to go up as the year goes on. The bank is expected to hike its policy rate further because the monetary tightening hasn't made a difference to inflation.

The decline in home prices is not enough to make up for the increased interest rates. Home prices have risen more than 40% since the start of the Pandemic.

The Northeast's pending home sales were down 30.1% year over year. Sales were down in the Midwest for the month and the year.

In the South, sales fell 8.1% for the month and were down 30.0% year over year, and in the West, sales fell 11.7% for the month and were down 38.7% from the year before.