Pending home sales in the United States hit their highest level in seven months; mortgage applications fall

Real estate signs advertise new homes for sale in several new developments in York County, South Carolina, USA, February 29, 2020. REUTERS / Lucas Jackson // File Photo

  • Pending home sales rise 8.1% in August
  • Contracts increase in all four regions
  • Home purchase loan applications fall last week

WASHINGTON, Sept.29 (Reuters) – US second-hand home purchase contracts rebounded to their seven-month high in August, but rising prices as supply remains tight is slowing momentum of the real estate market.

Other data on Wednesday showed that home loan applications fell last week as mortgage rates rose after the Federal Reserve signaled it would likely start cutting monthly bond purchases as soon as possible. November. There are indications that the supply could improve in the fall.

“Supply constraints that drive up prices impact affordability and have been a barrier for buyers,” said Rubeela Farooqi, chief US economist at High Frequency Economics in White Plains, New York. . “The gradual easing of supply constraints should be positive, although affordability concerns could dampen sales in the very near term.”

The National Association of Realtors (NAR) said its pending home sales index, based on signed contracts, jumped 8.1% last month to 119.5. It was the highest reading since January and followed two consecutive monthly declines.

Economists polled by Reuters had forecast contracts, which turn into sales after a month or two, up 1.4%. Compared with a year ago, pending home sales fell 8.3% in August.

The housing market exploded at the start of the COVID-19 pandemic amid an urban exodus as people worked from home and took classes online. But the pandemic tailwind fades as vaccines get workers back to the office.

Pending home sales

Expensive houses also exclude certain first-time buyers from the market. The NAR reported last week that the share of first-time buyers was the lowest for more than 2.5 years in August. Sales of existing homes fell last month. Read more

Data on Tuesday showed that consumer sentiment towards home buying weakened for a third consecutive month in September, and house prices posted record gains in July compared to the previous month. last year. Read more

Lumber prices have fallen from record highs reached in May, which economists and real estate agents hope will encourage builders to step up construction of single-family homes. The resumption of seizures after a pandemic moratorium should also ease the inventory crisis.

But house prices are expected to remain high, which, combined with rising mortgage rates, could further erode affordability. In a separate report released Wednesday, the Mortgage Bankers Association said home purchase loan applications fell 1.2% last week from the previous week.

Requests for loan purchases are down 12% from a year ago. Mortgage rates on all types of loans have risen since the Fed’s announcement last Wednesday, with the benchmark 30-year fixed rate hitting its highest level since early July, according to the MBA.

MBA

The U.S. central bank’s massive monthly bond buying program to help the economy recover from the pandemic has helped keep mortgage rates low. With the rise in US Treasury yields in recent days, mortgage rates could climb, which could attract some buyers into the market in anticipation of further increases.

“We expect home sales to trend sideways through the remainder of 2021,” said Mahir Rasheed, US economist at Oxford Economics in New York.

The surge in pending home sales last month was led by regions in the South and Midwest, where the NAR said house price increases were generally moderate compared to the rest of the country. Contracts climbed 10.4% in the Midwest and 8.6% in the densely populated South. They increased 4.6% in the Northeast and 7.2% in the West.

Reporting by Lucia Mutikani; Editing by Andrea Ricci

Our Standards: Thomson Reuters Trust Principles.

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