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Pending sales down in Aug. as inventory shrinks

WASHINGTON – Sept. 29, 2016 – After bouncing back in July, pending home sales cooled in August for the third time in four months and are at their lowest level since January, according to the National Association of Realtors® (NAR).
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, declined 2.4 percent to 108.5 in August from a downwardly revised 111.2 in July. It’s also slightly lower (0.2 percent) year-to-year (108.7 in August 2015. The index is now at its second lowest reading this year after dropping to 105.4 in January.
Lawrence Yun, NAR chief economist, says suffering supply levels have taken the wind out of the momentum the housing market experienced earlier this year.
“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,” Yun says. “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 miniscule number of affordable listings.”
According to Yun, evidence is piling up that the current housing recovery could stall without more new home construction. Housing inventory has declined year-over-year for 15 straight months; properties in August typically sold 11 days quicker than in August 2015. Existing-home prices have risen year-over-year for 54 consecutive months and increased last month 5.1 percent.
“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,” adds Yun.
Earlier this month, NAR released a study that found single-family home construction isn’t keeping pace with job creation in 80 percent 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 in the country – especially those in the West.
“Given the current conditions, there’s not much room for sales to march again towards June’s peak cyclical sales pace,” says Yun.
Following last month’s decline, Yun expects existing-home sales in 2016 to be around 5.36 million – a 2.1 percent increase from 2015 and the highest annual pace since 2006 (6.48 million). The national median existing-home price growth is forecast this year to rise around 4 percent.
Regional breakdown
The PHSI in the Northeast rose 1.3 percent to 98.1 in August, and is now 5.9 percent above a year ago. In the Midwest, the index decreased 0.9 percent to 104.7 in August, and it’s now 1.7 percent lower than August 2015.
Pending home sales in the South declined 3.2 percent to an index of 119.8 in August and are now 1.5 percent lower than last August. The index in the West fell 5.3 percent in August to 102.8, and is now 0.6 percent lower than a year ago.
© 2016 Florida Realtors®  
Source: Florida Realtors Feed

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