The data recorded by Mortgage News Daily (MND) shows that as of Thursday, October 22, the 30-year fixed mortgage rate, despite a slight decrease, remains at the level of 7.30%. Currently, there is still uncertainty in energy prices and inflation. Under the combined influence of unfavorable factors, the “Existing Home Sales Pending Home Sales Index” for September has dropped to its lowest level since 2001.
According to a press release by the National Association of Realtors (NAR) on Tuesday, September saw a 7.3% decrease in the nationwide Existing Home Sales Pending Home Sales Index compared to August, marking the lowest level since the index was established in 2001. Year-over-year, the index declined by 11.3%.
The latest survey from the Mortgage Bankers Association (MBA) reveals the impact of high interest rates on borrowers. For the week ending October 16, mortgage applications decreased by 5.3% compared to the previous week, refinancing applications dropped by 2% from the previous week and by 59% year-over-year, and the unadjusted purchase index decreased by 7% compared to the previous week and by 18% year-over-year.
MBA’s Vice President and Deputy Chief Economist, Joel Kan, analyzed that the 18% year-over-year decrease in the purchase index is due to high interest rates making it difficult for homebuyers to afford properties, indicating a cooling down of the real estate market this autumn.
Dr. Lawrence Yun, Chief Economist at NAR, analyzed that the rapid increase in mortgage rates led to a weakening real estate market in September. Despite job growth and income increases supporting housing demand, housing affordability is more greatly affected by changes in mortgage rates.
Yun believes that the rise in mortgage rates has far exceeded the Federal Reserve’s short-term rate hikes and suggests that mortgage rates may have already peaked. He mentioned, “While obtaining a mortgage is challenging, the limited number of non-performing assets ensures the stability of housing prices.” Both buyers and sellers in the market may be in a wait-and-see mode, anticipating favorable changes in mortgage rates.
However, a report released by NAR last week indicated a 1.5% increase in the total existing home sales in the US for September, with inventory rising by 1.9% to reach 1.6 million units, equivalent to a 4.8-month supply. This seems to contradict the decline mentioned in the NAR press release on Tuesday. How should this be understood?
Real estate agent Andy Huang from the Han Investment Group in San Gabriel Valley, Los Angeles County, analyzed the differing reports on the September housing market, explaining that they reflect different stages of transactions.
Huang stated in a written interview, “Closed homes refer to properties that were previously negotiated and later completed transactions. Pending homes, on the other hand, record newly signed purchase contracts, which typically take an additional one to two months to complete. Therefore, an increase in closed sales may indicate a decrease in new transactions in the pipeline.”
He pointed out that different batches of buyers in the market are facing different financing environments. The average 30-year fixed mortgage rate published by Freddie Mac on October 15 was 7.40%. Those who completed home transactions in September and those recalculating purchasing power at today’s new rates may not be starting from the same point.
This timing difference directly influences homeowners’ perceptions of the market. Current homeowners seeing recently closed sales in their neighborhoods may perceive continued market support, while prospective buyers currently house-hunting may decide to lower budgets or pause bidding due to the latest loan quotes. Both sides are observing the market; it’s just at different reference points.
For homeowners in San Gabriel Valley preparing to sell, national data fluctuations may not directly translate to their property’s value. Huang advised local sellers in Los Angeles to check if nearby similar listings are receiving offers, which properties are moving to pending status, and which price-reduced properties are still stagnant. This approach provides a better understanding of the overall market.
Furthermore, Huang suggests that buyers should not interpret the decrease in the “Existing Home Sales Pending Home Sales Index” in the report as a signal of an impending massive drop in home prices. Price adjustments depend on local supply and demand dynamics, and homeowners may choose to delay selling. Drawing conclusions solely based on a single month’s report may not be accurate. ◇