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Pending home sales climbed 1.1% in September, according to the National Association of Realtors.

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, rose to 72.6 last month. Year over year, pending transactions declined 11%.

"Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years," says Lawrence Yun, NAR chief economist. "Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated."

The Northeast, Midwest, and South posted monthly gains in transactions, while the West experienced a loss. All four U.S. regions had year-over-year declines in transactions.

The Northeast PHSI increased 0.8% to 63.1, a loss of 12.7% from September 2022. The Midwest index expanded 4.1% to 74.3, down 9.2% from one year ago. The South PHSI rose 0.7% to 87.1, retreating 10.7% from the prior year. The West index declined 1.8% to 55.3, dropping 12.9% from September 2022.

"Sales are expected to turn positive by early next year, with affordable regions and fast job-creating markets in better positions to recover, led by the Midwest and South," adds Yun.

Looking ahead to the final months of 2023 and into next year, NAR forecasts that the 30-year fixed mortgage rate will average 6.9% for 2023 and decrease to an average of 6.3% in 2024, while the unemployment rate will lower to 3.7% this year before increasing to 4.1% in 2024.

NAR predicts existing-home sales will decrease 17.5% in 2023, settling at 4.15 million, before rising 13.5% to 4.71 million in 2024. Compared with last year, national median existing-home prices are projected to remain stable in 2023—edging higher by 0.1% to $386,700 before increasing by 0.7% next year to $389,500. Housing starts will drop 10.4% from 2022 to 2023 to 1.39 million before rising to 1.48 million, or 6.5%, in 2024.

NAR also expects new-home sales will grow from last year by 4.5% in 2023 to 670,000 and increase by another 19.4% in 2024 to 800,000. The national median new-home price will drop by 5.9% this year to $430,800 and improve by 3.5% next year to $445,800.

"Because of home builders' ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates,” adds Yun. “This underscores the importance of increased inventory in helping to get the overall housing market moving.”