US pending home sales plunge 7.3% to a record low as mortgage rates bite

Signed contracts to buy previously owned homes in the United States fell 7.3% in September from August and 11.3% from a year earlier, the National Association of Realtors (NAR) said on Tuesday, 20 October. Xinhua and Realtor.com noted that this put the index at its lowest level since the series began in 2001; economists had expected a decline of only about 0.4%.

All regions down

Sales fell in all four US regions. The West saw the steepest monthly drop (-9.2%, and -15.0% year on year), followed by the South (-8.2%), the Midwest (-6.5%) and the Northeast (-4.2%).

“Market conditions weakened in September due to fast-rising mortgage rates,” said NAR chief economist Lawrence Yun. He added that rates “could be topping out”, but warned that rising energy prices and the inflation they bring are “highly uncertain”. Yun said the small number of distressed properties is keeping prices steady.

Why it matters

Pending sales usually turn into closed sales within one or two months, so the data points to weak existing-home sales this autumn. The report helped pull Treasury yields slightly lower on Tuesday: the 10-year yield slipped below 5.12%, Xinhua reported, as the data cooled expectations of near-term Federal Reserve rate increases.