The leading indicator of the U.S. housing market, the pending home sales, increased by 2.2% month-on-month in October to 77.4, reaching a seven-month high

On Wednesday, the National Association of Realtors (NAR) in the United States released data showing that the October existing home sales index rose significantly month-over-month, unexpectedly reaching a seven-month high, due to a brief decline in mortgage rates that attracted buyers.

The existing home sales index in the U.S. increased by 2% month-over-month to 77.4 in October, far exceeding the expected decrease of 2%. The previous value was revised from 7.4% to 7.5%. The year-over-year increase was 6.6%, higher than the expected 0.2% and the previous value of 2.2%.

Regionally, the index of homes for sale in all four regions of the U.S. saw an increase, with the Northeast region rising by 4.7% month-over-month, reaching its highest level since early last year. Despite hurricanes hitting the Southeast at the end of September and during October, the index of homes for sale in the South still saw a slight increase.

The existing home sales index is considered a leading indicator of home sales, as properties typically go under contract one to two months before they are sold.

Analysts pointed out that homebuyers, troubled by high financing costs, experienced a brief relief at the end of summer when mortgage rates fell to their lowest level in two years. This decline sparked a buying frenzy, although rates subsequently rose again, a trend that continued into October.

NAR Chief Economist Lawrence Yun stated in a statement:

“After nearly two years of suppressed home sales, the momentum for home buying is gradually recovering. Although the Federal Reserve decided to lower short-term interbank lending rates in September, mortgage rates are still rising moderately, and sustained job growth along with more housing inventory is attracting more consumers into the market.”

The supply of existing homes has rebounded to its highest level in four years, but it remains far below pre-pandemic levels.

Nevertheless, affordability remains a challenge. Economists now expect that due to stubborn inflation, the Federal Reserve will adopt a more gradual approach to interest rate cuts, and mortgage rates will remain elevated for a longer period. Meanwhile, the prices of existing homes continue to rise year-over-year