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Pending home sales in November were unchanged compared with October and 5.2% lower than November of last year, according to the National Association of Realtors.
The reading, which is based on signed contracts during the month, is a forward-looking indicator of closed sales as well as the most current look at what potential homebuyers are thinking.
Mortgage rates are key in this report, with the average rate on the 30-year fixed mortgage soaring over 8% in mid-October before dropping sharply to 7.5% in the first week of November, according to Mortgage News Daily. It ended the month around 7.25%.
Analysts had expected the drop to cause a slight gain in pending sales, but apparently it wasn’t enough, given steep home prices and tight supply.
“Although declining mortgage rates did not induce more homebuyers to submit formal contracts in November, it has sparked a surge in interest, as evidenced by a higher number of lockbox openings,” said Lawrence Yun, NAR chief economist.
Regionally, pending sales rose 0.8% month over month in the Northeast and 0.5% in the Midwest. Sales made a stronger 4.2% gain in the West — where prices are highest and a drop in mortgage rates would have the largest impact — and fell 2.3% in the South. Pending sales were lower in all regions in November compared with same month in 2022.
Mortgage rates are now solidly in the mid-6% range, but the supply of homes for sale is still very low. Builders are ramping up production, but new homes come at a price premium. Prices for existing homes continue to rise.
“With mortgage rates falling further in December – leading to savings of around $300 per month from the recent cyclical peak in rates – home sales will improve in 2024,” Yun added.