U.S. home buyers did not get a boost from lower mortgage rates in September. Signed contracts to buy existing homes were basically flat for the month, rising just 0.3 percent from August, according to the National Association of Realtors. These so-called "pending" home sales are now 1 percent higher than September of 2013, the first annual gain in 11 months.
"Housing supply for existing homes was up in September 6 percent from a year ago, which is preventing prices from rising at the accelerated clip seen earlier this year," said Lawrence Yun, chief economist for the NAR. "Additionally, the current spectacularly low mortgage rates should help more buyers reach the market."
While the average rate on the 30-year mortgage wavered near historical lows, credit availability continues to be a problem for potential home buyers. The Realtors report that of the reasons for not closing a sale, 15 percent of agents said it was buyers unable to obtain credit.
Regionally, pending homes sales in the Northeast increased 1.2 percent in September, and are now 2.9 percent above a year ago. In the Midwest they decreased 1.2 percent month to month and are now 4.0 percent below September 2013. In the South, pending sales increased 1.4 percent monthly and 1.7 percent from a year ago. Sales in the West slipped back 0.8 percent monthly but are still 3.6 percent above a year ago.
Contracts to buy newly built homes were flat in September. Closed sales of existing homes, which are based on contracts signed in July and August, were higher than expected, although still running below where they were one year ago.
Price is becoming an ever larger factor in the housing market, as all-cash investors buy fewer homes, leaving the market to mortgage-dependent, owner-occupants. Younger buyers are still struggling with credit availability amid high levels of student debt. Home price jumps in the past two years were far greater than income growth, and while the gains this year are easing, today's higher price points are still causing sticker shock.
Real estate agents in several of the nation's larger markets say homes have now been sitting longer for sale, and sellers are starting to get more realistic. While the number of listings historically drops this time of year, inventories are higher than they were a year ago. That has put buyers in the driver's seat again, after a few years of lean listings and stiff competition.
Mortgage rates dropped even lower in October, before rising slightly again. The low rates, however, did not push mortgage applications to buy a home any higher. The rise in sales is likely due to the simple fact that there are more homes to choose from now.
"The bleeding has stopped from the rate increases from a year ago which is reflected in the stable picture at the national level," said Frank Nothaft, chief economist at Freddie Mac in a monthly report. "We've seen a pick-up in the number of states and metros improving at the local levels based on their three month trend, pointing once again to more housing markets working their way back to the fundamentals."
CLARIFICATION: This story was updated to reflect that so-called "pending" home sales are existing homes already under contract to be sold.