U.S. September Pending Home Sales Hit 25-Year Low as Rates Surge

Pending Home Sales Index at 66.0, down 7.3% from previous month

With U.S. mortgage rates surging to the mid-7% range, contracts for existing-home sales in September fell to their lowest level since records began. As high interest rates and rising home prices made buying a home less affordable, housing starts also declined.

Wall Street in Manhattan, New York. New York, U.S. = Correspondent Hwang Yunju.

The National Association of Realtors (NAR) said on October 20 (local time) that its Pending Home Sales Index plunged 7.3% from the previous month to 66.0 in September. This was the lowest level since the index began to be compiled in 2001. It was also down 11.3% from the same month a year earlier.

The Pending Home Sales Index is calculated based on the number of contracts signed for existing homes. Because such contracts typically lead to completed home sales one to two months later, the index is considered a leading indicator of future trends in the housing market.

Demand for home purchases weakened across the United States. The number of contracts in the West fell 9.2% from the previous month, the largest decline among regions, while the South, the country's largest home sales market, saw an 8.2% drop. Contract numbers also declined in the Midwest and Northeast.

The main cause of the sharp drop in home sales was a surge in mortgage rates. According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage was 7.40% as of October 15, the highest level in about three years. The rate had been 6.71% in early September, rising 0.69 percentage points in just over a month.

Rising international oil prices amid the U.S.-Israel war against Iran have heightened inflation concerns, pushing up U.S. Treasury yields and, in turn, mortgage rates. The higher cost of borrowing to buy a home is believed to be prompting buyers to delay signing contracts.

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