House Hunters Swoop In as Buying Power Rises
October 29, 2019
Lower mortgage rates have increased buying power by 6%, and more house hunters want to take advantage. That helped boost contract signings by 1.5% in September, the second consecutive month for increases, the National Association of REALTORS® reported Tuesday.
NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, rose to a reading of 108.7 in September. (An index reading of 100 is equal to the level of contract activity in 2001.) Contract signings are up 3.9% year over year.
“Even though home prices are rising faster than income, national buying power has increased 6% because of better interest rates,” says Lawrence Yun, NAR’s chief economist. “Furthermore, we’ve seen increased foot traffic as more buyers are evidently eager searching to become homeowners.”
Fort Wayne, Ind., Rochester, N.Y., Pueblo, Colo., Columbus, Ohio, and Topeka, Kan., saw the largest increase in active listings in September compared to a year ago.
Yun says the upper end of the market is particularly performing strongly. However, sales should be even higher, he says. Yun has called for more homebuilding to meet increasing buyer demand.
“Going forward, interest rates will surely not decline in a sizable way, so the changes in the median price will be the key to housing affordability,” Yun says. “But home prices are rising too fast because of insufficient inventory.”
Besides greater new-home construction, Yun also called on exploring other ideas to increase inventories, such as greater use of modular, factory-constructed homes, converting old shopping malls or vacant office space into condos, and permitting more accessory dwelling units.
Updated: October 23, 2020