Pending home sales in the United States surged in October by 7.5%, according to the National Association of Realtors’ (NAR) pending Home Sales Index. Contracts to purchase previously owned homes increased in all four regions of the United States after declining in September.
Pending home sales likely increased as Americans rush to buy property before mortgage rates get too high. Demand for homes has remained high since the COVID-19 pandemic began in 2020. At the beginning of the pandemic, as many people transitioned to remote work and online schooling, people moved away from cities to the country or to suburbs and invested in larger homes that included things like a home office. In this way, the housing market did very well at the beginning of the pandemic.
However, raw material shortages and the global supply chain have kept many new homes from being built in an accurate timeframe. While there are many contracts for new homes that have started, the actual completion of these new homes has taken much longer than normal. Labor shortages have also impacted how quickly these homes can be made.
As a result, there hasn’t been a lot of homes on the market for Americans to purchase — and demand hasn’t gone down to any great extent. The price of homes has also surged for a variety of reasons, leaving the homes that are on the market higher in price than what homes cost before the pandemic began. Because of all of these many factors, many first-time homebuyers have subsequently been left out of the market and can no longer buy homes.
While the demand for homes is still high, home buying activity has cooled down somewhat this year, possibly for a variety of reasons. For one, people have stopped making the transition into remote working, and many people have actually returned to the workplace this year, or students have returned to school and no longer conduct online schooling. This has, as a result, slowed down the migration to move into bigger houses that accommodate for at-home work.
The few homes on the market likely have also slowed down demand somewhat, as have the high home prices. While there may be a lot of Americans who would like to invest in a new or previously owned home, many first-time buyers are shut out of the market, which may be slowing down the overall desire to own a house. While demand has cooled down a bit, home sales for 2021 as a whole will likely reach six million — the most in about 15 years.
This latest increase of pending home sales does come as a surprise, as economists thought contracts sales would increase, though not nearly by as much. However, October’s numbers are still lower than October 2020’s numbers by about 1.4%.
Many Americans are anticipating an increase in mortgage rates. Rental rates have also surged in the past few months. This has left many Americans searching to buy property before rates get too high — or before they’re shut out of the housing market.