US Pending Home Sales Index Drops 7.3% in September on Higher Mortgage Rates

what happened

The number of US homes placed under contract fell more than economists expected in September, as quickly rising mortgage rates kept potential buyers on the sidelines. The National Association of Realtors (NAR) published the data, which Dow Jones Newswires reported.

The pending home sales index, a leading gauge of home sales based on contract signings, dropped 7.3% month over month to 66.0. Economists polled by The Wall Street Journal had forecast a 0.4% decline. Compared with a year earlier, the index was down 11.3%. The West posted the steepest monthly fall, at 9.2%.

NAR Chief Economist Lawrence Yun said market conditions weakened because of fast-rising mortgage rates. He noted that job and income growth can support purchases, but affordability depends mainly on borrowing costs. Yun also said mortgage rates may be peaking, since they have risen far more than the Federal Reserve's short-term rate hikes.

why it matters

Weak housing data shows high mortgage rates are holding back demand. For markets this points to a slowdown in home sales, mortgage lending and residential construction, and it feeds into expectations for future Fed policy.

market impact

US housing and mortgage lenders: weaker demand pressures home sales and mortgage volumes

tags

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