After increasing 1.5% in September, pending home sales increased only slightly in October, rising just 0.1% compared with the previous month but rising 1.8% compared with October 2015, according to the National Association of Realtors (NAR).
That brought pending home sales to an index score of 110.0 on NAR’s Pending Home Sales Index, which estimates pending home sales based on contract signings.
“Most of the country last month saw at least a small increase in contract signings, and more notably, activity in all four major regions is up from a year ago,” says Lawrence Yun, chief economist for NAR, in a release. “Despite limited listings and steadfast price growth that’s now carried into the fall, buyer demand has remained strong because of the consistently reliable job creation in a majority of metro areas.”
The chief culprit in the slowdown of pending home sales this year has been the lack of inventory. Also creating a major headwind – especially for first-time home buyers – is the fact that home prices have been rising much faster than personal incomes, due, in part, to the lack of supply. According to NAR, about 40% of sales in October sold at or above list price – an increase from 33% in October 2015.
“Many of the successful shoppers in October likely had to move fast and outbid others for the few listings available in the affordable price range,” Yun says. “Those obtaining a mortgage last month were likely the last group of buyers to lock in a rate near historically low levels now that rates have marched to around four percent since the election.”
With contract activity holding steady, Yun is forecasting that existing-home sales will reach a pace of around 5.36 million this year, which surpasses the 5.25 million seen in 2015.
Regionally, pending home sales increased 0.4%, month over month, in the Northeast, 0.7% in the West and 1.6% in the Midwest. However, they decreased 1.3% in the South.