Contract signings increased 1.9% in October, according to the National Association of Realtors®. The uptick in sales occurred despite the country being in the middle of the longest government shutdown, which has since ended. Overall, contract signings dipped 0.4% year over year.
Month over month, pending home sales increased the most in the Midwest, followed by the Northeast and South, but dropped in the West. Meanwhile, year over year, pending home sales increased in the Midwest and South, but decreased in the Northeast and West.
A home sale is listed as pending when the contract has been signed, but the transaction has not closed. Usually, the sale is finalized within one or two months of signing.
Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales.
Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.
“Pending home sales tend to lead existing-home sales by roughly one to two months and are a good indicator of market conditions,” explains Hannah Jones, senior economic research analyst at Realtor.com®.
“August’s uptick in pending home sales led to the October increase in existing-home sales, which marked the fourth consecutive year-over-year gain. This momentum reflects the tailwinds of easing mortgage rates and gradually improving home supply.”
The Midwest leads the pack with a 5.3% increase in pending home sales month over month and a 0.9% increase year over year.
The Northeast also saw an increase in pending home sales by 2.3% month over month, but a 1% decrease year over year.
The South increased 1.4% month over month in pending home sales and saw a 2% increase year over year.
Only the West saw a decrease in contract signings—1.5% month over month and 7% year over year.
“The Midwest shined above other regions due to better affordability, while contract signings retreated in the more expensive West region,” said NAR Chief Economist Lawrence Yun. “Days on the market typically lengthen from November through February, providing better negotiating power to buyers during the holiday season.”
Mortgage interest rates
The increase in pending home sales comes as mortgage interest rates have been hovering close to the 6% mark.
The average rate on a 30-year fixed home loan is 6.26% for the week ending Nov. 20, according to Freddie Mac. New numbers will be out on Wednesday ahead of the Thanksgiving holiday.
The 6.26% rate is still lower than what applicants were seeing the same time a year ago, when rates averaged 6.84%.
The Federal Reserve is set to meet again Dec. 9-10. Central bank policymakers will decide whether to cut rates again.
They’ve already cut the federal funds rate twice this year by a quarter point each.
This time, they have some key data to factor in. The U.S. economy added 119,000 jobs in September, which exceeded economists’ expectations, according to a report from the Bureau of Labor Statistics—which was released nearly seven weeks late due to the longest government shutdown in U.S. history.
“Job gains in September, following the data blackout, are reassuring and suggest the economy is not slipping into a recession,” Yun added. “This may boost confidence in future homebuying.”
The lower rates work in buyers’ favor, as inventory continues to climb. The number of listings rose for the 24th straight month, according to Realtor.com housing data. The number of homes for sale is over the 1 million mark for the sixth month in a row.
The national median list price edged up 0.4% from a year ago to $424,200.
“Buyers who have been waiting on the sidelines may find renewed opportunities to secure a home before year-end, particularly in markets with ample inventory where sellers are more willing to negotiate,” says Jones.