Signed contracts to buy previously owned homes in the U.S. unexpectedly rose in July, even as buyers continued to confront a spike in mortgage rates.
The National Association of Realtors said Wednesday that its pending home sales index climbed 0.9% over the course of July. Economists surveyed by Refinitiv expected contracts to decline by 0.6%.
“The small gain in contract signings shows the potential for further increases in light of the fact that many people have lost out on multiple home buying offers,” said Lawrence Yun, NAR chief economist.
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Pending sales remain down 14% from the same time last year.
But the stronger-than-expected report suggests the housing market is slowly recovering from the deep freeze that it entered as a result of the Federal Reserve’s interest-rate hike campaign.
“Jobs are being added and, thereby, enlarging the pool of prospective home buyers,” Yun said. “However, rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many.”
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Still, the market remains bogged down by the astronomic rise in mortgage rates over the past year, as well as a worsening inventory shortage.
The problem is unlikely to be resolved anytime soon. With mortgage rates hovering near the highest level in two decades, sellers who locked in a low rate before the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers.
The number of available homes on the market at the end of July was down by more than 9% from the same time last year and down a stunning 46% from the typical amount before the COVID-19 pandemic began in early 2020, according to a recent report from Realtor.com.
Adding to the trouble is that builders have been slow to get new construction on the market. New listings are being added at the slowest pace on record because many houses are still under construction.
Rates on the popular 30-year fixed mortgage surged to 7.23%, Freddie Mac reported last week, well above the 5.55% rate recorded one year ago and the pre-pandemic average of 3.9%. It marked the highest level for interest rates since 2001.
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This is a developing story. Please check back for updates.