Pending Home Sales Dealt A Setback After 2.3% Drop in Contracts In September

Pending home sales were dealt a surprise blow on Thursday as the number of signed contracts to buy existing hopes dropped by 2.3% in September, according to the National Association of Realtors (NAR). Pending home sales refers to the measure of contracts that are signed for the purchase of an existing home.

NAR’s chief economist Lawrence Yun said potential buyers likely halted their home purchases with the intention to resume in the new year, adding that slumps like these "happen nearly every year."

“Contract transactions slowed a bit in September and are showing signs of a calmer home price trend, as the market is running comfortably ahead of pre-pandemic activity,” said Yun.

Home sales transactions fell the steepest in the Midwest and Northeast, dropping 3.5% and 3.2%, respectively. Smaller declines were recorded in the South and the West, but they remain well below sales levels at the same time last year, according to NAR.

Last week, the Department of Commerce reported the number of permits to build new homes dropped 1.6% in September with 1,589,000 being issued. First-time buyers and minorities are particularly impacted by these trends because they usually lack either the savings or pre-existing equity necessary to make a home purchase.

Homebuilders, however, were recently found to be optimistic in their sentiments about the housing market. NAR's Yun previously predicted that the end of federal mortgage forbearance programs adopted during the pandemic could lead to an expansion of the supply of homes into 2022, easing the supply shortage.