NAR: Pending Home Sales Fell 2.4% In August

Posted by Patrick Barnard on September 30, 2016 No Comments
Categories : Residential Mortgage

Pending home sales decreased 2.4% in August compared with July, falling to a score of 108.5 on the National Association of Realtors’ (NAR) Pending Home Sales Index.

The decrease brought the index to its second-lowest reading this year. What’s more, it was the third time in the past four months that it decreased.

The culprit continues to be tight inventory and a lack of affordability. U.S. home prices have risen year over year for 54 consecutive months. As of July, they were within 0.6% of the record high set in July 2006, according to the S&P CoreLogic Case-Shiller Indices. Meanwhile, builders are not producing enough modestly sized new homes to meet demand.

“Contract activity slackened throughout the country in August, except for in the Northeast, where higher inventory totals are giving home shoppers greater options and better success signing a contract,” said Lawrence Yun, chief economist for NAR, in a statement. “In most other areas, an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the minuscule number of affordable listings.”

Yun adds that without more new home construction, the current housing recovery could stall. Housing inventory has decreased year over year for 15 straight months, and as a result, most homes are not staying on the market for long – properties in August typically sold 11 days quicker than in August 2015.

“There will be an expected seasonal decline in new listings in coming months, which could accelerate price appreciation and make finding an affordable home even more of a struggle for would-be buyers,” Yun said.

Earlier this month, NAR released a study revealing that single-family home construction is not keeping pace with job creation and is lacking overall in 80% of measured metro areas.

When combined with the scant supply levels for existing homes, these tight inventory conditions continue to hamper affordability in many of the largest cities – especially those in the West.

“Given the current conditions, there’s not much room for sales to march again toward June’s peak cyclical sales pace,” said Yun.

Currently, Yun is forecasting that existing-home sales in 2016 will reach 5.36 million, a 2.1% increase from 2015 and the highest annual pace since 2006 (6.48 million).

However, affordability could continue to hold back sales: Home prices are forecast to increase another 4% over the next 12 months.

For more, including a regional breakdown of pending home sales, click here.

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