After decreasing for two months straight, pending home sales inched up slightly in October, rising 0.2% compared with September and 3.9% compared with October 2014, according to the National Association of Realtors (NAR).
Gains in the Northeast and West were offset by declines in the Midwest and South, NAR reports.
Lawrence Yun, chief economist for NAR, says pending sales have plateaued this fall, as buyers struggle with low inventory and rising prices.
‘Contract signings in October made the most strides in the Northeast, which hasn't seen much of the drastic price appreciation and supply constraints that are occurring in other parts of the country,’ Yun says in a statement. ‘In the most competitive metro areas – particularly those in the South and West – affordability concerns remain heightened as low inventory continues to drive up prices.’
However, as with all things in real estate, the degree of affordability varies considerably from market to market.
‘Areas that are heavily reliant on oil-related jobs are the exception and have already started to see some softness in sales because of declining energy prices,’ adds Yun.
Currently, NAR is forecasting that existing-home sales will reach an annual rate of 5.30 million by the end of this year – the highest rate since 2006.
Ongoing inventory shortages and affordability pressures from rising prices and mortgage rates will likely temper sales growth to around 3% (5.45 million) in 2016, NAR predicts.
The firm further forecasts that home prices will increase about 5% next year – down slightly from an anticipated increase of 6% this year.
‘Unless sizeable supply gains occur for new and existing homes, prices and rents will continue to exceed wages into next year and hamstring a large pool of potential buyers trying to buy a home,’ says Yun.