(Bloomberg) -- US pending home sales sank last month by the most since the immediate aftermath of the pandemic, illustrating a swift and steep downturn for a housing market beset by soaring borrowing costs.
The National Association of Realtors’ index of contract signings to purchase previously owned homes decreased 10.2% in September, the sharpest fall since April 2020, according to data released Friday. The drop was worse than the most downbeat projection in a Bloomberg survey of economists.
At 79.5, the gauge is the lowest since mid-2010 when excluding the early months of the pandemic.
Pending sales are down 30.4% from a year ago on an unadjusted basis, evidence of a housing market that’s become a casualty of aggressive interest-rate hikes by a Federal Reserve aiming to extinguish rapid inflation. Thirty-year fixed mortgage rates are now above 7%, to a more than 20-year high that’s reducing affordability.
“The new normal for mortgage rates could be around 7% for a while,” Lawrence Yun, NAR’s chief economist, said in a statement. “Only when inflation is tamed will mortgage rates retreat and boost home purchasing power for buyers.”
Yun said that listings are down compared with last year because many homeowners are unwilling to sell houses they purchased when rates were around 3%.
A report earlier this week showed a measure of mortgage applications to buy a home fell last week to the lowest level since 2015. The 2.3% drop was the fifth straight, according to Mortgage Bankers Association data.
The NAR report showed contract signings plunged in all four regions last month. The West registered an 11.7% decline while pending sales in the South dropped 8.1%.
The index is based on a sample that covers about 40% of multiple listing service data each month.
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