Contracts to buy existing single-family houses and condos jumped 7.4% in September, an indication that people responded to a drop in mortgage rates and more properties on the market.
The index used by the National Association of Realtors to measure pending home sales climbed to 75.8, compared to 70.6 in August. All four major U.S. regions saw gains, with the greatest increase in activity in the West at 9.8%.
“Contract signings rose across all regions of the country as buyers took advantage of the combination of lower mortgage rates in late summer and more inventory choices,” NAR chief economist Lawrence Yun said in a statement. “Further gains are expected if the economy continues to add jobs, inventory levels grow, and mortgage rates hold steady.”
On a year-over-year basis, pending sales rose 2.6% from 73.9. An index of 100 is equal to the level of contract activity in 2001, the first year the agent association used this tool.
Contracts to buy houses are considered a good way to predict what actual sales may look like in one to two months, since it typically takes that long for a contract to lead to the actual purchase.
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Pending sales were up 7.1% in the Midwest from the previous month, 6.7% in the South and 6.5% in the Northeast. Year over year, contract signings increased in the Northeast and West, but stayed at the same level elsewhere.
The association also issued its outlook for key housing measures for the next two years, including home prices and mortgage rates. Yun said the median existing-home price is projected to rise to $410,700 in 2025 and to $420,000 in 2026. The median was $404,500 in September.
The annual rate for a 30-year fixed-rate mortgage should drop to 5.9% next year but then rise to 6.1% in 2026, the association said. The average rate was 6.54% as of last week. Meanwhile, the inventory of homes on the market will grow to 4.47 million in 2025 and more than 5 million the following year.
“During the next two years, expect a slower rate of growth in home prices that’s roughly in line with the consumer price index because of additional supply reaching the market,” Yun said.