According to the National Association of REALTORS, pending home sales have reached their lowest level in two decades amid high-interest rates.

This is the sixth straight month that NAR’s Pending Home Sales Index has fallen, falling 4% to 73.9 in November based on contract signings. There was a 37.8% decrease in contract activity levels compared to November 2021.

NAR chief economist Lawrence Yun stated, “Pending home sales dropped to the second-lowest level in 20 years as interest rates reached one of their highest levels in history this year and dramatically reduced contract signings.” According to him, the overall economy has been hurt by falling home sales and construction.

For the last six quarters, residential investment has decreased as a percentage of GDP, Yun indicated. The lag time between mortgage rates and home sales is approximately two months. Throughout December mortgage rates were falling. In the coming months, home-buying activity should inevitably rebound. Moreover, it can help economic growth.

NAR reports decreases in all four regions on an annual and monthly basis. The Northeast PHSI plunged 7.9% to 63.3 in November, down 34.9% from November 2021. The Midwest index decreased 6.6% to 77.8 in November, a decline of 31.6% from one year ago. According to the South PHSI, the index fell by 2.3% to 88.5 in November, down by 38.5% over the same month last year. A 0.9% decline in the West index occurred in November, with 55.1 tumblings 45.7% from November 2021.

According to Yun, relatively affordable home prices in the Midwest have held up better, while high home prices in the West have contributed to a significant reduction in activity.