US pending home sales stuck at 22-year low despite dip in rates

[mahatmakanejeeves]

Source: Yahoo! Finance

Yahoo Finance

US pending home sales stuck at 22-year low despite dip in rates

Gabriella Cruz-Martinez · Personal finance writer
Thu, Dec 28, 2023, 10:18 AM EST 5 min read

Contract signings for US existing homes remained unchanged in November from the previous month even as mortgage rates scaled back from 23-year highs.

The index for pending home sales stayed at 71.6 in November, the National Association of Realtors (NAR) released Thursday. The index reading was the lowest since the index’s founding in 2001. An index level of 100 is equal to the pace of contract activity in 2001. ... The results were below the 0.9% increase that economists polled by Bloomberg had estimated.

The lack of change in the index, an early indicator of the housing market’s health, shows how some buyers may be hesitant to re-enter the market despite the dip in mortgage rates last month. It may also reflect seasonal trends, as some buyers opt to wait until the holidays are over to return to their purchase plans.

Overall activity in the resale market remained below year-ago levels with pending transactions down 5.2%.

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Read more: https://finance.yahoo.com/news/us-pending-home-sales-stuck-at-22-year-low-despite-dip-in-rates-151817940.html

[LiberalFighter]

1. I'm wondering if the scumbag companies that buy up homes are an issue with this?

[PSPS]

7. Yes, that is the largest factor. Interest rates don't matter when there's no available inventory to begin with.

Just two years ago, 80% of home sales were to "investors."

[LiberalFighter]

8. In the past I've gotten lots of calls to buy my home. I lots of mail wanting it too.

[PSPS]

9. Yeah, everyone gets those calls and letters. I get them at least weekly.

Their business model is to buy a property under market value, swoop in and do a HGTV-quality "renovation," and then either put it up for sale at a profit or retain it as a rental.

[EarthFirst]

2. Surely no one is surprised by this; as the median home price is $431K

[sybylla]

3. Haven't seem home prices cool or drop in response to this stall.

The market will pick up when prices return to sane levels.

[andym]

4. Mortgage rates are trending down but are still too high-- need to be under 6%

the more under the better, until then housing sales will be weak.

[PSPS]

11. Actually, the higher interest rate should make for a more robust market -- more bargaining room

The real problem is available inventory. Most of the available houses are being bought up by institutional investors like Blackrock.

[andym]

12. Actually Blackrock is much less of a problem for the inventory than the high interest rates and low construction

Last edited Sat Dec 30, 2023, 03:03 AM - Edit history (2)

Why? Owners who would buy a new property to move to, don't want to sell because they would be paying as much as 2x more in interest.
There have been numerous stories about this-- here is a typical one:
https://spectrumnews1.com/oh/columbus/news/2023/07/12/high-mortgage-rates-slow-down-sellers--keep-market-competitive
"For potential sellers, despite the high equity, they might be able to collect on their increased home values. Jackson said anyone who bought or refinanced their homes in the past 10 years is likely paying an interest rate between 3-5%. Selling to downsize or upgrade would likely mean accepting a rate closer to 6-8%.

“A lot of people are locked into those lower interest rates and they have no desire to increase that at the moment,” Jackson said. “I’ve heard a lot of people say they’re staying there forever until interest rates go back down.”

Now as for Blackrock and other rental housing corps-- I've seen multiple articles about them ruining the housing market especially about 2-5 years ago. But their overall influence is still small according to this article from that same time period: https://www.theatlantic.com/ideas/archive/2021/06/blackrock-ruining-us-housing-market/619224/ See this link for a version that is not paywalled. https://archive.is/KAvyW This article btw blamed low construction levels for the limited supply 2 years ago, which no doubt also contribute beyond the high interest rates today.

[Ford_Prefect]

5. Investor real estate is the key. They hijacked market pricing years ago and are holding the market hostage.

The house I'm living in is rated at more than 2x the pre-COVID value. Local rents are similarly outrageous and show no decline.

[TeamProg]

6. More reasons that noted here: a major factor is the inventory available. Fewer houses avail: higher prices, more demand.

Inventroy of offered houses is near a TEN YEAR low.

https://ycharts.com/indicators/us_existing_home_inventory

https://fred.stlouisfed.org/series/ACTLISCOUUS

[pfitz59]

10. No homes for sale in my neighborhood

Prices ridiculously high.