Pending home sales dipped 0.6% in October, compared to September, and were down 1.6% compared to October 2012, according to the National Association of Realtors (NAR).
October marked the fifth consecutive month that pending home sales declined. NAR's data reflects contracts but not closings.
Lawrence Yun, chief economist for NAR, says the government shutdown in the first half of last month helped contribute to the decline in pending home sales. He points out that, in a recent NAR survey, 17% of Realtors reported delays in October, mostly from waiting for Internal Revenue Service income verification for mortgage approval.
‘We could rebound a bit from this level, but still face the headwinds of limited inventory and falling affordability conditions,’ Yun says in a release. ‘Job creation and a slight dialing down from current stringent mortgage underwriting standards going into 2014 can help offset the headwind factors.’
In the Northeast, pending home sales rose 2.8%, compared to September, and were up 8.1% compared to October 2012. In the Midwest, they were up 1.2%, compared to September, and were up 3.2% compared to October of last year. However, the gains in those two regions were offset by declines in the West and the South, where pending home sales slid 4.1% and 0.8%, respectively.
Yun notes that in the West, tight inventory is holding back contract offers. He expects generally flat home sales going into 2014, but continued growth in home prices resulting from tight inventory.
Yun says the Consumer Financial Protection Bureau's new ability-to-repay/qualified mortgage rules going into effect in January, which are expected to slow the mortgage approval process, could result in further declines in pending home sales starting next year. This, combined with the prospect of another government shutdown, ‘would harm both housing and the economy," he says.
Still, the real estate market improved considerably in 2013. The report notes that pending homes sales are, on average, nearly 10% higher this year, compared to 2012. NAR projects that more than 5.1 million homes will be sold in 2013 – with comparable volume expected in 2014.
In addition, home prices are expected to have increased by about 11%, on average, in 2013 compared to last year. NAR forecasts that home prices will increase another 5% to 5.5% in 2014.
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