US existing home sales hit a 15-year high in 2021, but supply hit a record low, the National Association of Realtors said, indicating challenges ahead for the real estate market
Pending home sales is the second housing data this week that showed a surprise GETTY IMAGES NORTH AMERICA via AFP / Brandon Bell

Pending sales of homes in the U.S. rose 1.1% last month despite mortgage rates being at their highest level in 20 years.

The index that tracks the number of contracts signed before a home sale is closed increased to 72.6 in September from 71.8 in August, as reported by the National Association of Realtors in a statement Thursday. Economists surveyed by Reuters had expected a 1.8% decline. However, compared to the same time the previous year, the index fell by 11%.

All four U.S. regions in the study showed a year-over-year drop in sales. On a monthly basis, there were increases in the Northeast, Midwest and South, while the West posted a loss.

"Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years," NAR chief economist Lawrence Yun said in the statement. "Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated."

New Home Sales

The NAR pending home sale index is a leading indicator of upcoming sales closings. Other housing data released this week performed better than expected.

Sales of newly constructed homes unexpectedly rose by 12% in September to the strongest pace since February 2022, according to the Census Bureau and the Department of Housing and Urban Development in a statement Wednesday.

PulteGroup, the third-largest U.S. homebuilder, reported in its quarterly earnings report that Americans' interest in home purchases remains solid, helping it increase its profit in the third quarter by 1.7%.

The average 30-year fixed mortgage rate stood at 7.63% as of the week ending Oct. 19, marking the sixth consecutive increase and the highest level since December 2000. The rate was at 6.94% a year prior.

New Forecasts

NAR estimates that the 30-year fixed mortgage rate will average 6.9% for 2023 and decrease to 6.3% in 2024.

For existing-home sales, the group forecasts a decrease of 17.5% in 2023 and a gain of 13.5% in 2024. NAR's estimate for newly constructed home sales this year is a 4.5% gain, followed by a jump of 19.4% in 2024.

"Because of homebuilders' ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates," NAR's Yun said. "This underscores the importance of increased inventory in helping to get the overall housing market moving."