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First Cut: NAR Pending Home Sales Index declined in October as pent-up demand satisfied after September’s hectic pace

The NAR’s Pending Home Sales Index was down 1.7% in October to 106.7 after 108.6 in September. The September reading represented a near-term peak and probably that a burst of activity in the prior month cut into demand in the near term for October. Consumers are still engaged in homebuying while mortgage interest rates remain low. The index was up 4.4% compared to the year-ago month. If mortgage rates were a bit higher at 3.69% in October 2019 than they were in 3.62% and 3.61% in August and September, respectively, they are substantially lower than the 4.83% of October 2018.

Pending home sales were lower in three of four regions in October. While the Northeast managed a 1.9% rise, pending sales were down 3.4% in the West, 2.7% in the Midwest, and 1.7% in the South. Again, the decreases were likely due to a reset after a busy September. The sharpness of the decline for the West may be related to wildfires in California and the destruction of housing stock that makes finding a property to purchase more difficult and more expensive.

The dip in contracts signed probably means that sales of existing homes will be lower in November. However, that should not diminish that consumers are considering buying a home while rates improve affordability.

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