Rosalind Evans
In a surprising twist, November’s pending home sales remained steady, unaffected by the dramatic fluctuations in mortgage rates. This stability, as reported by the National Association of Realtors, comes amidst a landscape of high home prices and limited supply. With mortgage rates experiencing a sharp decline from mid-October, industry experts had anticipated a slight uptick in pending sales, a key indicator of future closed sales and buyer sentiment. However, the unchanged sales figures present a more complex picture of the current housing market.
The National Association of Realtors’ latest report reveals that November’s pending home sales mirrored October’s figures, showing no change. However, there was a 5.2% decrease compared to the previous year. This stagnation occurs against the backdrop of a fluctuating mortgage landscape. Notably, the average rate on a 30-year fixed mortgage soared above 8% in October before falling to 7.5% in early November, as per Mortgage News Daily, ending the month at approximately 7.25%.
Contrary to analysts’ expectations, this rate reduction did not translate into a significant increase in pending sales. The high cost of homes and a tight supply chain played a pivotal role in this outcome. Lawrence Yun, NAR’s chief economist, observed, “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.”
The regional analysis showed mixed results: a modest increase in the Northeast and Midwest, with a more notable 4.2% rise in the West, where high prices mean that mortgage rate changes have a more significant impact. The South, in contrast, experienced a 2.3% decline. All regions reported lower pending sales compared with November of the previous year.
As of now, mortgage rates have stabilized in the mid-6% range. However, the housing market continues to grapple with a scarcity of available properties. While builders are increasing production, the high price of new homes remains a hurdle. Existing home prices are also on an upward trajectory.
Yun remains optimistic about the future, citing further reductions in mortgage rates in December, which could lead to monthly savings of around $300 from the recent peak. He predicts, “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.”
Despite the significant drop in mortgage rates, the stability in November’s pending home sales underscores the complexities of the current real estate market. Factors like high home prices, limited supply, and the unpredictable nature of mortgage rates continue to influence buyer behaviour. Looking ahead, the anticipated improvement in home sales, driven by decreasing mortgage rates, offers a glimmer of hope for a more dynamic market in 2024.
