Contracts to purchase previously owned US homes plunged to a record low in September as rising mortgage rates depressed demand, the National Association of Realtors (NAR) said on Tuesday.

Source: Reuters

The Pending Home Sales Index tumbled 7.3% to 66.0, the lowest level since the series started in 2001, and was down 11.3% from a year earlier. Economists polled by Reuters had forecast a slip of only about 0.5%, making the drop far sharper than expected.

Source: Reuters

-7.3%pending sales in September
66.0index reading — a record low
7.40%average 30-year mortgage rate
-11.3%compared with a year earlier

“Market conditions weakened in September due to fast-rising mortgage rates,” said NAR chief economist Lawrence Yun. “Although job growth and income gains can support home purchases, housing affordability is more affected by changes in mortgage rates.” Mortgage finance firm Freddie Mac put the 30-year fixed rate at an average of 7.40% last week, the highest in nearly three years.

Source: HousingWire / NAR

Contracts fell in all four regions. The West recorded the largest monthly decline, down 9.2%, followed by the South at 8.2%, the Midwest at 6.5% and the Northeast at 4.2%. On a yearly basis the West was down 15.0%.

Source: Realtor.com / NAR

For diaspora families saving toward a first home, the numbers explain a frozen market: asking prices have now fallen for 11 straight months and inventory is climbing, yet buyers are holding back until rates move. Yun said mortgage rates could be topping out, having already risen much more than the Federal Reserve's short-term rate hikes — but for now, a move from 7% to 7.5% can add hundreds of dollars a month to a typical payment and price buyers out entirely.

Source: Realtor.com / NAR