Pending home sales in the US were flat in September even as mortgage rates were lowered
Contracts to purchase previously owned homes in the U.S. were unexpectedly unchanged in September, likely as concerns about the labor market kept prospective buyers on hold despite declining mortgage rates.
Last month’s flat pending home sales data, reported by the National Association of Realtors on Wednesday, followed an upwardly revised 4.2% gain in August.
Economists polled by Reuters had expected the contract, which goes into sales after a month or two, would rise 1.0% after previously reporting a 4.0% rise in August. Pending home sales fell 0.9% from a year earlier.
Mortgage interest rates declined after the Federal Reserve cut interest rates again. The US central bank is expected to lower its overnight benchmark interest rate by another 25 basis points to a range of 3.75%-4.00% later on Wednesday.
“It’s possible that job market weakness and general economic uncertainty are discouraging buyers, although affordability remains an issue,” said Abiel Reinhart, economist at JP Morgan.
The contract fell 3.4% in the Midwest region and fell 0.2% in the West region. However, the figure increased 1.1% in the densely populated South region and jumped 3.1% in the Northeast region.
The average rate on the popular 30-year fixed-rate mortgage fell to 6.30% at the end of September from about 6.56% in August, data from mortgage finance agency Freddie Mac showed. Since then, the rate has declined to a one-year low of 6.19%.
But lower mortgage rates have been overshadowed by growing concerns about the labor market, with households taking advantage of lower borrowing costs to refinance their mortgages. A report from the Mortgage Bankers Association (MBA) on Wednesday showed refinancing activity jumped 9% last week compared to the previous week, while loans to buy homes rose 5%.
THE GOVERNMENT SHUT DOWNS THE HOUSING MARKET
The US government shutdown has delayed the release of official labor market reports and other economic data, but independent surveys show unfavorable conditions have persisted since the release of the jobs report in August, which showed stagnation in job growth and a rise in the unemployment rate to nearly a four-year high of 4.3%.
A survey from the Conference Board on Tuesday showed the number of consumers expecting fewer jobs over the next six months increased in October to the highest level since April. The proportion expecting more jobs in the period was the lowest in the last six months.
The sluggish labor market largely reflects low hiring, with economists saying companies are choosing to absorb higher costs from import tariffs at the expense of adding headcount. Companies are also starting to use artificial intelligence, reducing demand for labor.
Amazon.com this week announced massive layoffs in favor of automation. Reuters has tracked more than 25,000 layoffs announced by US-based companies this month.
The government shutdown, now in its 29th day, is also putting pressure on the housing market.
MBA reported a more than 26% decline in applications for the mortgage assistance program run by the U.S. Department of Agriculture for low-income people. The USDA says on its website that the program helps low- and very low-income applicants purchase housing in eligible rural areas by providing short-term payment assistance.
HomeAbroad, a real estate investment technology platform, said earlier this month that the shutdown was hampering access to insurance coverage for would-be homeowners in flood-prone areas, and warned that 108,570 home closings were at risk if the shutdown lasted a month, costing an estimated $47.68 billion.
Source: Reuters
