Home sales, give it a few more months to respond to lower rates

Pending home sales in August rose .6% m/o/m, about in line with the estimate of up 1%. Versus last year, contract signings of existing home sales are lower by 4.3%. As said yesterday, the average 30 yr mortgage rate in August was 6.5% vs 6.88% in July and vs around 6.20% today.

Bottom line, while it hasn’t yet really shown up in the data with regards to consumers jumping off the fence to buy a home with the drop in mortgage rates, let’s give it thru October as after that the holidays will stall things. If we don’t see much movement in the pace of transactions, then it would be a sign that the affordability challenges can’t be all solved by a 100-150 bps drop in mortgage rates after almost tripling since 2021, especially when the median home prices is up about 50% over the past 4 years.