Pending home sales slip amid higher mortgage rates, rising prices
Higher mortgage rates and rising home prices scared off prospective home buyers in September, sparking the fourth straight monthly drop in a key measure of home sales.
WASHINGTON—Higher mortgage rates and rising home prices scared off prospective home buyers in September, sparking the fourth straight monthly drop in a key measure of home sales.
The National Association of Realtors’ gauge of pending sales of existing homes fell 5.6% last month from August, the trade group said Monday. That pushed the measure down to its lowest level since December 2012. The 1.2% drop from a year ago marked the first time in more than two years that pending home sales were lower than they were a year earlier.
The Realtors group attributed the drop to rising costs of purchasing a home, as well as budget battles in Congress that hit consumers’ confidence.
Economists surveyed by Dow Jones expected a 0.5% monthly rise. “This is worse than we expected and it surely lays to rest the notion that the housing market is strong enough to absorb the rise in mortgage rates with no ill-effects,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Pending home sales are considered a more timely gauge of the housing market because the report measures when a contract is signed but the transaction hasn’t closed. The closing can be one to two months later.
The number of contracts signed has been declining steadily since May. During that month, the sales figure shot up nearly 6% from the previous month as many so-called fence sitters rushed to buy homes and lock in lower mortgage rates just as rates started to rise.
Between April and August, the average rate on a 30-year fixed-rate mortgage rose by more than a full percentage point, according to Freddie Mac. It peaked at 4.58% in August, and hovered around those levels for much of September.