US Homebuyer Demand Falls Below 2008 Crash Levels as Mortgage Rates Weigh on REITs

Pending home sales in the United States have fallen to their weakest level on record, dropping below any reading seen during the 2008 financial crisis. The National Association of Realtors' pending home sales index came in at 71.2 in August, a figure that undercuts every reading recorded between 2008 and 2011. Contract signings are now roughly 45% below their 2020 peak and about 30% below pre-pandemic levels, with elevated mortgage rates identified as the primary cause. Signings last peaked in 2021 when rates were near 3%, and sustained pressure above 6.5% has since kept buyers sidelined.

The weakness in housing demand is rippling through real estate investment trusts. Compass Point lowered its price target on Frontview REIT, citing the rate environment, while Presidio Property Trust announced the expiration and results of an exchange offer for all outstanding shares, a sign of continued corporate restructuring pressure among smaller REITs. Angel Oak Mortgage REIT filed a Form S-3 registration statement on October 5, indicating plans to access capital markets. Some analysts, however, are taking a contrarian stance, arguing the selloff in REITs has gone too far and presents a buying opportunity.

The deteriorating housing data adds pressure to Treasury Secretary Scott Bessent, whose public forecasts of a housing market thaw, gasoline at $3 a gallon, and inflation returning to 2% have repeatedly missed their marks, raising questions about his credibility on economic projections.