Mortgage rates soared to their highest average in October- reaching 8% – many home-buyers took a step back from buying a house. This resulted in contract signings for existing homes dropping to their lowest number in the last 20 years, according to a Thursday Report by NAR.
The Pending Home Sales index of NAR dropped by 1.5% last October, reaching the lowest number ever since 2001 when it was created. Also, pending home sales are down by 8.5% compared to NAR reports from a year ago.
However, a turnaround can be in sight as mortgage rates are starting to drop from the recent peaks. The 30-year fixed rate mortgage averaged 7.29% in the week, according to a report by Freddie Mac.
The Chief Economist of NAR, Lawrence Yunhas, said that despite the latest borrowing costs being lower, home buyers are up against a new problem – looking for a home to buy.
“Recent weeks’ successive declines in mortgage rates will help qualify more home buyers, but limited housing inventory is significantly preventing housing demand from fully being satisfied,” according to Yun. “Multiple offers, of course, yield only one winner—with the rest left to continue their search.”
Despite a dip in home sales, new offers are still coming up because of a low inventory. Also, many current homeowners are not ready to sell their homes. According to NAR, buyers will possibly face intense competition for mid-priced and starter homes.
According to Yun, home sales are boosted in locations where there is more housing inventory available. He said that sales for properties that are priced above $750,000 went higher compared to a year ago. This happened due to enough inventory at that price point. More so, sales of newly built homes have risen by 4.5% compared to one year ago. This is because builders have more choices to offer to the buyers than what’s available in the existing market.
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