As the housing market continued to falter under the weight of increased mortgage rates, the number of contracts to purchase previously owned houses in the United States dropped for a fourth consecutive month in September.
NAR said on Friday (Oct 28) that its Pending Home Sales Index, which is based on contracts being signed, fell 10.2 percent to 79.5 in September. In each of the four areas, contracting activity decreased.
Contracts, which turn into sales after a month or two, were expected to fall by 5%, according to a Reuters survey of economists. In September, pending home sales dropped by 31.0 percent annually.
Contract cancellations have been falling for eight months in a row, and this suggests that existing house sales will continue to plummet.
The Federal Reserve’s (Fed) aggressive interest rate rises have had the most negative impact on the housing market. Since annual inflation has increased at the quickest rate in 40 years, the US central bank is tightening monetary policy in an effort to reduce economic demand.
The Federal Reserve tightened monetary policy at one of the fastest pace in at least a generation by increasing its benchmark overnight interest rate to the current range of 3.00 percent to 3.25 percent from near zero just in March.
Mortgage rates are very high due to the expectation of future policy tightening. For the first time since April 2002, Freddie Mac reports that the average rate for a 30-year fixed home loan has risen over 7% this week.
The government revealed on Thursday that residential investment fell for a sixth consecutive quarter in the third, the longest such run since the housing market crash in 2006.