High mortgage rates jolt U.S. housing market as pending home sales plunge 7.3%

【Financial News, New York = Correspondent Lee Byeong-cheol】  The U.S. housing market is rapidly freezing up as mortgage rates surge. Pending contracts for existing homes plunged 7.3% in September from the previous month, and housing starts for new homes fell to their lowest level in a year. With home builders’ sentiment also deteriorating to its worst level in 14 years, warnings are emerging that the housing market slump could continue into next year.
Pending home sales fell 7.3% in September from the previous month, according to the National Association of Realtors (NAR) on the 20th (local time). That was an 11.3% decline from the same period last year. Pending home sales measure the number of contracts signed to buy existing homes and serve as a leading indicator of future trends in home sales.
The biggest reason for the sharp drop in home sales is rising mortgage rates. According to Mortgage News Daily, the average rate on a 30-year fixed-rate mortgage surged from about 6.8% at the beginning of September to 7.6% at the end of the month. That was a 0.8-percentage-point increase in just one month.
NAR Chief Economist Lawrence Yun explained, "Employment growth and rising incomes can support home purchases, but the ability to afford a home is more affected by changes in mortgage rates."
Home sales declined across the United States. The West, where home prices are high, saw the steepest drop, with pending home sales down 9.2% from the previous month. The South, the most active region for home sales in the country, also saw an 8.2% decline.
The slowdown in home sales is also spreading to the new-home construction market. The U.S. Census Bureau reported that single-family housing starts in September fell 4.56% from the previous month to an annualized rate of 859,000 homes. That was the lowest level since September last year.
Building permits, which offer an indication of future home-building activity, also fell 4% from the previous month. Both single-family housing starts and building permits declined more sharply than market experts had expected.
Home builders’ sentiment also deteriorated. The October builder confidence index released that day by the National Association of Home Builders (NAHB) fell to its lowest level in 14 years. All three measures—the current state of home sales, the outlook for future sales, and prospective buyer traffic—declined.
NAHB Chief Economist Robert Dietz said, "The housing market remains under pressure from supply-side constraints and a severe deterioration in housing affordability."



[email protected] Correspondent Lee Byeong-cheol Reporter