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Pending home sales failed to add a third month onto the mini rally it staged in June and July. The National Association of Realtors® (NAR) said its Pending Home Sale Index (PHSI) declined 7.1 percent to 71.8 in August and is now down 18.7 percent from its August 2022 level. The PHSI ended a three-month decline in June, rising 0.3 percent followed by a 0.9 percent increase in July. [pendinghomesdata] The PHSI is based on contracts signed during the month to purchase existing single-family houses, condos, and cooperative apartments. It is a leading indicator of those sales which are expected to close over the following 30 to 60 days. NAR will report September's existing sales on October 19. “Mortgage rates have been rising above 7 percent since August, which has diminished the pool of home buyers,” said Lawrence Yun, NAR chief economist. “Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets.” “It’s clear that increased housing inventory and better interest rates are essential to revive the housing market ,” added Yun. The index in all four of the nation’s major regions declined compared to both July and to the prior August. The Northeast PHSI was down 0.9 percent to 62.6 and was 18.2 percent lower on an annual basis. The index for the Midwest lost 7.0 percent and 19.1 percent compared to the two earlier periods to a reading of 71.3.
The highest mortgage rates in 20+ years drove another decline in mortgage applications during the week ended September 22. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, decreased 1.3 percent on a seasonally adjusted basis from one week earlier and fell by 2.0 percent on an unadjusted basis. The Refinance Index decreased 1.0 percent from the previous week and was 21 percent lower than the same week in 2022. The refinance share of mortgage activity grew to 31.9 percent of total applications from 31.6 percent the previous week. [refiappschart] The Purchase Index was 2.0 percent lower than the prior week on both a seasonally adjusted and unadjusted basis and was down 27 percent compared to the same week one year earlier. [purchaseappschart] According to Joel Kan, MBA’s Vice President and Deputy Chief Economist, “Mortgage rates moved to their highest levels in over 20 years as Treasury yields increased late last week. The 30-year fixed mortgage rate increased to 7.41 percent, the highest rate since December 2000, and the 30-year fixed jumbo mortgage rate increased to 7.34 percent, the highest rate in the history of the jumbo rate series dating back to 2011. Based on the FOMC’s most recent projections, rates are expected to be higher for longer, which drove the increase in Treasury yields. “Overall applications declined, as both prospective homebuyers and homeowners continue to feel the impact of these elevated rates,” he said. “The purchase market, which is still facing limited for-sale inventory and eroded purchasing power, saw applications down over the week and 27 percent behind last year’s pace. Refinance activity was down over 20 percent from last year and accounted for approximately one third of applications, as many homeowners have little incentive to refinance.”
August sales of newly constructed single-family homes failed to match the robust numbers from July but were significantly better than those a year earlier. The U.S. Census Bureau and Department of Housing and Urban Development said last month’s sales were at a seasonally adjusted annual rate of 675,000, the lowest since March and an 8.7 percent decline from July’s revised estimate (from 714,000) of 739,000 units. The August results were 5.8 percent higher than the 638,000-unit rate in August 2022. The August results did not meet the consensus estimates from either Econoday (699,000 annual units) or Trading Economics (700,000). Robert Dietz, chief economist for the National Association of Home Builders said of the report, “Builders continue to grapple with supply-side concerns in a market with poor levels of housing affordability. Higher interest rates (the average was over 7 percent) price out demand, as seen in August, but also increase the cost of financing for builder and developer loans, adding another hurdle for building.” On an unadjusted basis, there were 54,000 homes sold during the month, down from 61,000 in July. Over the first eight months of 2023, sales of new homes have totaled 474,000 compared to 466,000 at the same point last year. Sale prices have fallen slightly in the last 12 months. The median price in August was $430,300, $10,000 lower year-over-year. The average price has dropped from $530,800 to $514,000.