Pending home sales stage a surprising rebound

Pending home sales rose annually for the first time in three years, Redfin found, an indicator that market conditions around flattening mortgage rates and still-constrained inventory are not holding back buyers.

Meanwhile, Redfin's own buyer demand measurement of tours and other sale services its agents provide, rose to its highest level since May for the period ended Oct. 6.

Other signs of the shift in the purchase environment is September's small but significant annual increase in mortgage rate locks for this purchase.

The most recent Mortgage Bankers Association Weekly Application Survey found submissions to buy homes were flat compared with the prior period even though interest rates were higher.

Mortgage rates, while increasing by 20 basis points this past week to their highest level since the start of September, are still 125 basis points lower than they were last year at this time, another positive for the purchase market.

Pending home sales were up 2% for the four weeks ended Oct. 6 versus the same time last year, Redfin said. Its Homebuyer Demand Index also was up 2% year-over-year on that same date. It was up 5% from one month earlier.

Redfin attributed the growth to some consumers entering the market following the September Federal Open Market Committee rate cut, although some observers have opined that other potential buyers might be waiting for future reductions in November and December.

"House hunters are monitoring mortgage rates closely, but so far, the increase in rates isn't slowing buyers down. The home I listed on Thursday got a lot of traffic over the weekend and received 10 offers," said Shoshana Godwin, a Redfin agent from Seattle, in a press release. 

Mortgage rate movements are hard to predict, especially given the volatility in the market.

"A buyer may lock in a slightly higher rate now than they would have two weeks ago, but if they wait, it's possible rates will increase more," Godwin said. "It's also possible rates drop more significantly, which could heat up competition."