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7 Journal PENDING HOME SALES DROP IN SEPTEMBER Pending home sales trailed off for the fourth consecutive month in September, according to the National Association of Realtors. Additionally, all four major regions recorded month-over-month and year-over- year declines in transactions. e Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, slumped 10.2% to 79.5 in September. Year over year, pending transactions slid by 31.0%. An index of 100 is equal to the level of contract activity in 2001. "Persistent inflation has proven quite harmful to the housing market," NAR Chief Economist Lawrence Yun said. "e Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers." Key Highlights: » Pending home sales dropped for the fourth straight month, down 10.2% from August. » Month over month, contract signings pulled back in all four major U.S. regions. » Pending sales decreased in all regions com- pared to one year ago. Pending Home Sales Regional Break- down e Northeast PHSI descended 16.2% from last month to 64.2, a decline of 30.1% from September 2021. e Midwest index retracted 8.8% to 80.7 in September, down 26.7% from one year ago. e South PHSI faded 8.1% to 97.0 in Septem- ber, a drop of 30.0% from the prior year. e West index slipped by 11.7% in September to 62.7, down 38.7% from September 2021. September experienced a steep drop in pending home sales, indicating further existing-home sales declines in October. "Pending home sales plummet 10.2% in Septem- ber, largest month-over-month decline since the start of the pandemic," First American Chief Economist Mark Fleming said. "is is not surprising as mortgage rates recent increase toward 7% and beyond dampened affordability and likely buyer enthusiasm, pending another round of rate increases by the Federal Reserve next week." Fleming continued, "is also strongly suggests October existing-home sales will also decline. While the number of households in the U.S. suggests that somewhere near 6 mil- lion existing-home home sales a year is normal, we are far from normal. Pending home sales indicate existing-home sales closer to 4 million SAAR than 5 million SAAR over the next few months." Yun also noted that new home listings are down compared to one year ago since many homeowners are unwilling to give up the rock-bottom, 3% mortgage rates that they locked in before this year. "e new normal for mortgage rates could be around 7% for a while," Yun added. "On a $300,000 loan, that translates to a typical monthly mortgage payment of nearly $2,000, compared to $1,265 just one year ago—a difference of more than $700 per month. Only when inflation is tamed will mortgage rates retreat and boost home purchasing power for buyers." Nationwide, the seasonally adjusted estimate of new houses for sale at the end of September was 462,000, representing a supply of 9.2 months at the current sales rate. "e months' supply of homes for sale rose by 1.1 months to 9.2, largely due to a slower sales pace," Duncan added. "However, of note is that the number of homes for sale that were already completed continued to rise steadily, up 19.1% from August. Since the beginning of the pandemic, most homes available for sale were not completed; however, a continual increase in the number of completed homes available for sale is now occurring, with the inventories of such homes now at the highest level since July 2020. is suggests to us that builders may be increasingly willing to offer more aggressive incentives and discounts to maintain sales of completed inventory. If so, this would likely put further downward pressure on home prices." RE/MAX reported that inventory has grown 3.9% since August and 30.4% year over year in its latest September 2022 report. New listings were down 7.6% since last month, and down 11.4% year over year, due to homeowners staying put in their homes more due to their current favorable financing. "After a sustained period of quick sales that kept the housing cupboard relatively bare, a supply of two months presents a lot more options for homebuyers," said Nick Bailey, RE/ MAX President and CEO. "For a long time, six months of inventory was the standard for a balanced market that favored buyers and sellers evenly. Now, with the evolution of technology and various changes in homebuying patterns, the new standard is becoming four months. We're halfway to that level, and the market is making steady progress toward balance. Home sales are still happening and having the right real estate professional by your side is critical for consumers looking to take advantage of the market conditions."