Pending home sales (contracts signed) fell 2.0% nationally in August, according to the National Association of Realtors (NAR), marking the third consecutive month of declines.
Pending transactions have slid a dramatic 24.2% compared to August of last year. It was inevitable that the overly frenzied market would cool.
Yet sales are not performing evenly across the nation, with another month of retracting sales in the Midwest, Northeast, and South regions while the West saw a slight increase on a monthly basis.
Meanwhile, all regions experienced double digit declines in pending home sales when compared to August 2021.
“The direction of mortgage rates – upward or downward – is the prime mover for home buying, and decade-high rates have deeply cut into contract signings,” said NAR Chief Economist, Dr. Lawrence Yun. “If mortgage rates moderate and the economy continues adding jobs, then home buying should also stabilize.”
Dr. Yun expects the year to end in this same “sluggish” condition as mortgage rates increase to nearly 7% during this time.
“Only when inflation calms down will we see mortgage rates begin to steady,” said Yun.
According to a release, NAR expects pending transactions to fall a total of 15.2% in this year as new home sales dip by 20.9%. Dr. Yun forecasts prices will rise by 9.6% to end the year, noting that tight inventory and a lack of distressed sales have kept prices high.
What does Dr. Yun expect for 2023? He projects that next year, price appreciation will slow and sales will increase.
“Next year, the annual median home price is expected to rise by only 1.2%,” he added. “Home sales will pick up in the second half of 2023, but will be down by 7.1% overall.”