Despite the recent rise in mortgage rates, early indications suggest that the housing market is headed in the right direction. The latest signal comes from National Association of Realtors‘ (NAR) Pending Home Sales Index (PHSI), showing sales in October increased 5.4% year-over-year and 2% compared to September.
The PHSI reading of 77.4 is the highest mark since March and the third highest since December 2023. The PHSI was marked at 100 in 2001.
“Homebuying momentum is picking up after nearly two years of weak housing sales,” NAR chief economist Lawrence Yun said in a statement. “Even mortgage rates are rising slightly despite the crisis The Federal ReserveThe decision to cut short-term bank lending rates in September, continued job growth and housing prices are bringing more buyers into the market.”
Breaking down the index geographically reveals more good news as the PHSI is growing strongly in all four regions of the country.
On a month-over-month basis, pending sales in the West grew the most by 9.8%, followed by the Midwest (+7.1%), the South (+6.7%) and the Northeast (+6.5%). Pending sales in the West also grew by 12.3% year over year. The Northeast posted an annual growth rate of 3.3% while the Midwest and South were lower.
“Pending October sales data is a sign that fourth quarter sales will be strong enough for 2024 sales to end up higher than 2023,” Bright MLS said chief economist Lisa Sturtevant in a statement. “However, there are winds blowing. Higher mortgage rates mean some buyers may decide to wait until 2025. ”
The positive PHSI reading comes on the heels of the NAR’s existing home sales report for October, which showed sales reaching a seasonally adjusted annual rate of 3.96 million. While that rate is below the historical average, the 2.9% year-over-year growth is the first annual increase since July 2021.
October new home sales data from US Census Bureau it was not very encouraging. Sales last month came in at a seasonally adjusted annual rate of 610,000, down 9.4% year over year. The decline is largely due to the large recession in the South, which easily leads to higher new home sales. That decrease is due in part to recent hurricanes and rising mortgage rates.
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