Pending Home Sales Unexpectedly Fell in September as House Affordability Declined

Contract signings for home sales fell an unexpected 2.3 percent in September compared with August, as purchases declined all across the United States.

Each of the four major U.S. regions saw contract activity decline month-over-month and year-over-year, according to the National Association of Realtors. Compared with a year ago, pending sales are down eight percent.

Analysts had forecast a one percent rise from August.

High prices may be deterring purchases. Prices are up nearly 20 percent compared to a year ago, far outpacing wage gains, and mortgage rates were higher in September than they were a year ago. That’s a double-hit to affordability.

“Some potential buyers have momentarily paused their home search with intentions to resume in 2022,” said Lawrence Yun, NAR’s chief economist.

Home sales have declined three out of the past four months, reflecting the strain on affordability from high prices and low inventory levels. New home builders have struggled to keep up with demand due to high prices of materials, supply-chain disruptions, and shortages of workers.

Pending sales usually lead to closed sales one-and-a-half to two months later, so these are sales that would close in October and November.

As a candidate, Joe Biden promised to increase the supply of affordable housing. But in President Biden’s first eight months in office, prices of goods, services, and housing have soared. And the number of new single-family home construction projects declined in July, August, and September despite rising prices for new homes.

Many of the housing officials in the Biden administration regard single-family housing as detrimental to the climate and racial equity. They are developing plans to make it relatively more costly to maintain single-family zoning and construct new single-family homes compared with apartments and attached homes. This is likely deterring investment in the capacity to build single-family homes.