Housing News

Home Sales Are Rising Thanks to Lower Mortgage Rates

More people eagerly bought new and existing homes in August as the recent decline in mortgage rates made purchasing a home a little more affordable. And it looks like sales will continue to rise in the near future.

Pending home sales, an indicator of future home sales based on signed real estate contracts, increased by 4% in August over July’s totals, according to a new report from the National Association of Realtors. (The report only looks at homes on the resale market and excludes new construction.)

Pending sales were also up 3.8% year-over-year.

“Lower mortgage rates are enabling more homebuyers to go under contract,” said NAR Chief Economist Lawrence Yun in a statement.

The average rate for a 30-year fixed-rate mortgage decreased from 6.75% in mid-July to 6.26% in mid-September, according to Freddie Mac data. That nearly half-a-percentage-point decline drove more homebuyers into the market.

NAR also noted that 19% of its members expect to see an increase in both homebuyer and home seller activity in the next three months.

Pending home sales increased by 8.7% in the Midwest from July to August, according to the NAR report. They jumped 5% in the West and went up 3.1% in the South

However, pending sales declined by 1.1% in the Northeast.

“Improvements in mortgage rates, affordability, and [housing] inventory are helping, but not yet driving a full recovery in housing demand,” First American Deputy Chief Economist Odeta Kushi said in a statement.

“Regionally, the Midwest led the way, offering relative affordability that, when combined with lower mortgage rates, helps make the payment-to-paycheck calculation work for many buyers,” Kushi added.

Kushi also noted that purchase mortgage applications also rose in September, as buyers pounced on the lower rates. Applications for a mortgage to buy a home jumped 18% year-over-year in the week ending Sept. 19, according to the unadjusted purchase index from the Mortgage Bankers Association.

“This suggests that the modest improvement in pending sales may continue into the fall, especially if affordability conditions stabilize,” Kushi said.