America’s relatively low mortgage rates spurred another increase in pending home sales in September, as the index rose 1.5%, according to the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased to 108.7 in September, rising from August’s 107.3.
Contract signings compared to a year earlier increased 1.5% from last month’s increase, but jumped 3.9% from 2018, NAR said.
Lawrence Yun, NAR’s chief economist, said historically low mortgage rates played a significant role in the two straight months of gains.
“Even though home prices are rising faster than income, national buying power has increased by 6% because of better interest rates,” Yun said. “Furthermore, we’ve seen increased foot traffic as more buyers are evidently eager searching to become homeowners.”
That being said, the index revealed that activity in the nation’s four major regions was split as the PHSI in the Midwest and South increased, while the Northeast and West experienced declines in month-over-month contract activity.
These are the PHSI changes for each region:
- Northeast: decreased by 0.4 % to 93.9 but is 1.3% higher than September 2018
- Midwest: Increased by 3.1% to 104.4 and is 2.7% higher than September 2018
- South: Increased by 2.6% to 127.5 and is 5.7% higher than September 2018
- West: Decreased by 1.3% to 95.1 but is 3.4% higher than September 2018
Yun says that moving forward, interest rates are not likely to decline in a sizable way, so changes in America’s median price will be the key to maintaining housing affordability.
However, Yun also warns that the nation’s lack of sufficient inventory is contributing to an increase in home price acceleration.
“In addition to boosting traditional home building, we should explore a greater utilization of modular factory constructed homes, converting old shopping malls or vacant office space into condominiums, permitting more accessory dwelling units, and other supply-increasing actions, in order to meet the rising demand for new housing,” Yun said.
