Real estate agents found themselves with ample free time in October, as pending home sales, an indicator of signed but unclosed sales contracts, experienced a 1.5% decline, compounding an already sluggish market, as reported by the National Association of Realtors (NAR). The figures mark the lowest point for pending sales since the index's inception in 2001, underscoring the apparent inability of most buyers to contend with the confluence of soaring property prices and elevated interest rates. The month of October witnessed interest rates peaking at around 8%, potentially exacerbating the challenge, even as home asking prices continued their ascent.
According to Lawrence Yun, NAR's chief economist, October witnessed a convergence of adverse conditions, with mortgage rates reaching unprecedented highs while contract signings for existing homes plummeted to their lowest in over two decades. Yun notes that recent modest declines in mortgage rates might expand the pool of eligible homebuyers, yet the persistently limited housing inventory poses a formidable obstacle to satisfying overall housing demand. The question lingers whether the dearth of buyers will stimulate an uptick in available homes, intensifying competition among sellers and resulting in price reductions. Steve Nicastro of Clever Real Estate acknowledges the ongoing tightness in inventory, predicting that it may be months before any substantial change occurs, emphasizing the discernible reduction in the number of active buyers.
Despite a marginal improvement in mortgage rates, hovering around 7.25% compared to the October peak of 8%, Shmuel Shayowitz, President and Chief Lending Officer at Approved Funding, contends that the dip in interest rates plays a pivotal role for buyers. He highlights the potential financial relief for home seekers, illustrating how even a 1% drop in rates, such as from 8% to 7%, can translate to savings exceeding $270 per month on a $400,000 loan. While Steve Nicastro remains cautious about predicting the housing landscape in 2024, he anticipates a moderate increase in housing inventory next year, contingent on the trajectory of interest rates. Unless rates experience a significant plunge, Nicastro doubts that homeowners currently enjoying a 3% mortgage rate will be prompted to list their properties on the market.
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