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Pending home sales in the U.S. remained unchanged in September, as economic uncertainty and a weak labour market outweighed the benefits of falling borrowing costs. The National Association of Realtors reported no monthly change, following a 4.2% rise in August, while sales were down 0.9% year-on-year. Regionally, contracts fell in the Midwest and West, but rose in the South and Northeast. The average 30-year mortgage rate eased to 6.30%, yet affordability issues kept buyers cautious. Analysts cited the ongoing government shutdown, rising unemployment, and job cuts as key drags on sentiment. While refinancing surged, new home purchases lagged, underscoring a fragile housing recovery amid persistent economic headwinds.
Pending home sales in the United States stayed flat in September, as a subdued labour market and broader economic uncertainty discouraged potential buyers from entering the property market, even as borrowing costs declined. The National Association of Realtors, in its latest report released earlier this week, confirmed that the level of signed contracts for previously owned homes showed no change compared to August, which had recorded an upwardly revised 4.2% rise. Advertisement
Economists had earlier anticipated a 1% increase, following August's previously reported 4% advance. Year-on-year, pending home sales fell by 0.9%. Analysts noted that although mortgage rates have eased since the Federal Reserve resumed cutting interest rates, the overall sentiment among home buyers remained cautious.
The Federal Reserve is expected to further reduce its benchmark overnight interest rate by another 25 basis points to a range between 3.75% and 4.00%. Economist Abiel Reinhart from J.P. Morgan commented that weakness in the employment market and economic uncertainty were discouraging buyers, though affordability constraints continued to pose significant hurdles.
Regionally, contracts declined by 3.4% in the Midwest and slipped marginally by 0.2% in the West, while increasing by 1.1% in the South and rising 3.1% in the Northeast. Data from Freddie Mac indicated that the average 30-year fixed-rate mortgage fell to 6.30% by the end of September, down from 6.56% in August, and has since eased further to a one-year low of 6.19%.
Despite lower mortgage rates, the Mortgage Bankers Association (MBA) reported that many households were taking advantage of improved borrowing conditions primarily for refinancing rather than new purchases. Refinancing activity rose 9% from the previous week, while loan applications for home purchases increased 5%.
The ongoing government shutdown has intensified the strain on the housing market, delaying crucial federal labour data releases. Independent surveys have indicated continued job market stagnation, following the last employment report that showed slowing job creation and an unemployment rate climbing to nearly a four-year high of 4.3%.
The Conference Board's survey revealed that consumer expectations for job availability weakened in October, with more respondents anticipating fewer employment opportunities over the coming six months. Economists observed that businesses, facing higher import costs due to tariffs, were limiting hiring and increasingly turning to artificial intelligence to offset expenses, thereby reducing labour demand.
Adding to this pressure, Amazon announced another round of job cuts this week in favour of automation. Reuters' data showed that more than 25,000 job losses had been declared by U.S.-based companies this month alone.
The impact of the government shutdown, now nearing a month, has also reached the mortgage sector. MBA noted a 26% decline in applications for the U.S. Department of Agriculture's housing assistance programme for low-income households in rural areas. The USDA clarified that the initiative helps low and very-low-income applicants by offering temporary payment assistance to make housing affordable.
HomeAbroad, a property investment technology platform, stated earlier this month that the shutdown was disrupting flood insurance coverage for potential homeowners in flood-prone regions. The company estimated that over 108,000 pending home transactions worth roughly USD 47.68 billion were at risk if the shutdown continued for a full month.
The U.S. housing market remains subdued amid economic uncertainty, a sluggish labour market, and prolonged government disruption. While lower mortgage rates offered temporary relief, affordability constraints and job insecurity continued to deter new buyers. Analysts believe the situation will remain fragile until the government resumes normal operations and employment conditions improve. The combination of weak consumer confidence and limited job growth continues to weigh heavily on the housing sector's near-term outlook.
Source - Reuters
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