Pending Home Sales Jumped 2.5% in September, the Biggest Monthly Increase in over 18 Months

Pending home sales jumped 2.5% month over month in September on a seasonally adjusted basis, the largest increase since January 2023, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. They rose 3.1% year over year, the biggest annual increase since May 2021.

Pending sales climbed last month for two reasons: Mortgage rates fell to the lowest level in two years, giving buyers more purchasing power; and The Federal Reserve cut interest rates and outlined a plan for future rate cuts. Redfin agents say some house hunters jumped into the market because they assumed the Fed’s September 18 decision would cause mortgage rates to plunge. But by that point, much of the decline had already happened. Mortgage rates actually ticked up after the Fed’s decision. That’s because markets had already priced in aggressive expectations for rate cuts, and employment data came in hotter than expected.

Still, buyers are getting better rates than they were a year ago, when mortgage rates were above 7%. The weekly average interest rate on a 30-year mortgage now sits at 6.44% after hitting a two-year low of 6.08% in late September. The Fed is expected to cut interest rates by another 25 basis points at their November 7 meeting, which shouldn’t have a big impact on mortgage rates. But that could change if the November 1 jobs report has any surprises.

“September showed that there are buyers and sellers who are ready to jump into the market—when the conditions are right,” said Redfin Senior Economist Elijah de la Campa. “Most buyers who went under contract last month did so when mortgage rates were falling and before two major hurricanes devastated much of the South. We’re closely watching October data to see whether the recent increase in rates and widespread devastation from the storms causes the market to slow back down.”

De la Campa continued: “My advice for buyers is don’t try to time the market. There are a lot of swing factors, like the upcoming jobs report and the presidential election, that could cause the housing market to take unexpected twists and turns. If you find a house you love and can afford to buy it, now’s not a bad time. Mortgage rates are still down from their peak, and buyers in some areas are able to negotiate because homes have been sitting on the market.”

Closed sales of existing homes, many of which were negotiated before the latest drop in mortgage rates, dropped to the lowest level on record aside from the start of the pandemic. They fell 0.5% month over month and 3% year over year in September—to a seasonally adjusted annual rate of 4,023,067.

Overall closed home sales (including existing and new homes) fell 0.2% month over month on a seasonally adjusted basis and declined 1.6% year over year—to the lowest level since December.

September 2024 Housing Market Highlights: United States