With mortgage rates soaring (now shockingly above 7% amid the fastest rise in history), it’s no surprise that analysts expected pending home sales to slide further in August (latest data) and they were right. Pending Home Sales fell 2.0% MoM (more than the 1.5% MoM decline expected) pushing the index down 22.5% YoY…
This is the 9th monthly decline in the last 10 months to its lowest since May 2011 (ex-COVID lockdowns)…
Contract signings decreased in three of four regions while the West posted a small increase, similar to July’s data.
“The direction of mortgage rates — upward or downward — is the prime mover for home buying, and decade-high rates have deeply cut into contract signings,” Lawrence Yun, NAR’s chief economist, said in a statement.
“Only when inflation calms down will we see mortgage rates begin to steady.”
Pending home sales are often looked to as a leading indicator of existing-home purchases given properties typically go under contract a month or two before they’re sold. Sales of previously owned homes, calculated when a contract closes, fell for the seventh straight month in August.
Finally, and perhaps most notably, as we noted previously, according to the Atlanta Fed, as of a few weeks ago, the median American household would needed to spend 44.5% of their income to afford payments on a median-priced home in the US, the highest percentage on record with data going back to 2006.
Well, as of today, that number is just over 50%. That’s right: more than half of the average US household’s income goes to paying housing payments, nearly double what this number was just two years ago… and this latest move comes after today’s August pending home sales data suggesting far worse is to come from the data.
That such a move can’t end in anything but tears is obvious to everyone… but the Fed, which still thinks it can somehow avoid the most destructive of hard landings.
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