Pending Home Sales Jump Unexpectedly, Despite Rising Rates

Pending home sales in September jumped 7.4% from August, surprising analysts who had expected only a slight 1% increase. This uptick brought sales to their highest level since March, reflecting a 2.6% year-over-year gain. Based on signed contracts, the rise in pending sales indicates strong buyer demand during a period of falling mortgage rates, which hit a low of 6.11% in early September before rising above 7% in October. Buyers were likely motivated by the temporary dip in rates and increased inventory options, with the most significant regional gains seen in the high-cost West, where rate drops have a more significant impact.

Despite higher recent mortgage rates, demand for home loans still increased and was 10% higher than the same week last year. However, overall mortgage application levels and home sales remain historically low. As rates climb again, affordability is under renewed pressure, and experts predict this surge in activity may be short-lived, likely not strong enough to boost 2024 home sales above 2023 levels.

First-Time Homebuyer Age Hits Record 38—What It Means for the Market

First-time homebuyers in the U.S. now have a median age of 38, the highest on record, up from the late 20s in the 1980s. A recent survey by the National Association of Realtors (NAR) shows that this age increase is driven by higher home prices, which demand bigger down payments and higher incomes. The share of first-time buyers has also dropped to 24%, a historic low, with many younger adults facing competition from wealthier buyers and high rents that make saving for a down payment challenging. A housing shortage, with 4 million homes needed to meet demand, has led to higher prices, especially for starter homes, which now average $250,000.

Repeat homebuyers have an advantage, often using home equity from previous properties to buy new homes, sometimes with cash. This trend has made older generations, particularly baby boomers, the primary winners in today’s market, with repeat buyers averaging 61 years of age. High rents further pressure renters, with about 50% of them spending over 30% of their income on housing, which limits their ability to save or reduce debt. Consequently, many renters are staying renters longer, as affordability remains a major hurdle.

Mortgage Demand Declines 11% as Interest Rates Rise After Election

Mortgage rates rose again last week, causing a decline in both refinance and purchase mortgage applications. Total mortgage application volume dropped by 10.8% from the previous week, with the average 30-year fixed-rate mortgage rate for loans under $766,550 increasing to 6.81%. This led to a notable decrease in demand; refinance applications fell by 19% but were still 48% higher than a year ago when rates were even higher. Purchase applications decreased by 5%, showing a slight increase of 2% from last year.

The higher rates affect homebuying despite increased supply and slightly eased home prices, as some buyers are now priced out. Economic uncertainty, along with election-related concerns, may also be contributing to buyers’ hesitation. Mortgage rates started relatively flat this week, but further market shifts are expected depending on the upcoming Federal Reserve rate announcement.