Pending home sales rise on lower mortgage rates, higher inventory

Pending home sales rose in October thanks to lower mortgage rates and an uptick in housing inventory, according to the National Association of Realtors (NAR) Pending Home Sales Index released Tuesday.

The index rose 1.9% month-over-month in October to a reading of 76.3. On a year-over-year basis, however, the index was down 0.4%.

An index reading of 100 is equal to the level of contract activity in 2001.

“Pending home sales ticked up in October from September, another sign that easing mortgage rates and slightly improved affordability are coaxing more buyers back into the market,” Odeta Kushi, the deputy chief economist at First American, said in a statement. “The monthly uptick and nearly flat level compared with a year ago, suggests a market that is stabilizing rather than stalling out.”

Regionally, on a monthly basis, the pending home sales index rose in the Northeast (67.2), Midwest (77.7), and South (91.4) at rates of 2.3%, 5.3% and 1.4%, respectively. The West posted the lone monthly decline at 1.5% to an index reading of 58.3. Year-over-year, pending home sales were up in the Midwest (0.9%) and the South (2.0%), but down in the Northeast (-1.0%) and the West (-7.0%).

“There is definitely regional variation in buyer activity,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “More inventory in the South and relative affordability in the Midwest likely drove the stronger pending sales activity.”

Realtors’ Confidence Index survey, which was also released on Tuesday, shows that 17% of NAR members expect an increase in buyer traffic over the next three months. This is down from 20% in September and 19% a year ago. On the sell-side of the transaction, 16% of members surveyed say they expect to see an increase in seller traffic, down from 19% last month and 19% in October 2024.

Looking ahead, economists are optimistic about both the housing market and the broader economy.

“October’s report fits neatly into a broader pattern,” Khushi said of the October pending home sales report. “Mortgage rates are on track to fall for a fifth straight month, and the monthly mortgage payment on the median-priced existing home in October was the lowest it has been all year. Buyers are responding – purchase mortgage application data from November point to additional momentum ahead as rate relief improves what households can afford. On the supply side, active inventory remains higher than it was one year ago, giving buyers more options at the same time that price growth is slowing and even declining in some markets. For households that can clear the affordability hurdle, this combination of lower rates, a bit more inventory and cooling price pressures is creating a more favorable affordability environment than at any point earlier in the year.”

Khushi added that her main takeaway from the report was that the housing market is beginning to heal as affordability begins to improve.