Pending home sales in the US rose throughout most of October despite the ongoing increase in mortgage rates. However, there are indications that potential buyers may be retreating as the presidential election approaches, as noted by Redfin. The forward-looking indicator of home sales, measured by contract signings, increased by 4.5% year-over-year for the four-week period ending on October 27, according to the real estate brokerage's report.
New listings also saw a 3.4% rise, aligning with trends observed over previous months. This gaining momentum comes even with a rise in mortgage rates that had fallen into the low 6% range at the end of summer. Unfortunately, daily average mortgage rates climbed back above 7% shortly after the conclusion of this four-week period, reflecting data from Mortgage News Daily as reported by Redfin.
"While it's typical for mortgage rates to rise as elections loom and investor expectations shift, the spike to 7% following the Federal Reserve's interest-rate cut is unexpected. It is equally surprising that pending sales have maintained their strength," said Chen Zhao, Economic Research Lead at Redfin.
The Federal Reserve had reduced interest rates by 50 basis points in September. With increasing mortgage rates and elevated home prices, the typical monthly mortgage payment reached $2,593 during this four-week timeframe, nearly the highest level since July. Though the data encapsulate growth in pending sales and new listings, it is essential to recognize that this comparison is against a sluggish October 2023, where the weekly average mortgage rate soared to a two-decade peak of 7.79%.
Redfin also highlighted signs that potential homebuyers are becoming more cautious, with mortgage-purchase applications dipping by 8% compared to the previous month. "The past week or so has felt notably quieter as we approach the election, leading many to hesitate on significant purchases ahead of this pivotal event," noted Nicole Stewart, a premier agent with Redfin in Boise, Idaho.
The US elections are scheduled for November 5..