What’s Behind the Drop in Sales Contracts?

October 29, 2015

Pending home sales lost more ground in September, reaching the second lowest level of the year, according to the National Association of REALTORS®’ Pending Home Sales Index, a forward-looking indicator based on contract signings. Pending home sales dropped 2.3 percent month-over-month in September as all four of the major U.S. regions saw a decrease in contract activity.

Lawrence Yun, NAR’s chief economist, says several factors are contributing to September’s cool off in contract signings.

“There continues to be a dearth of available listings in the lower end of the market for first-time buyers, and REALTORS® in many areas are reporting stronger competition than what’s normal this time of year because of stubbornly low inventory conditions,” he says. “Additionally, the rockiness in the financial markets at the end of the summer and signs of a slowing U.S. economy may be causing some prospective buyers to take a wait-and-see approach.”

While pending home sales were down in September, they still remain 3 percent above last year’s levels. Yun says he’s confident the housing market will prove itself as one of the brighter spots of a more-sluggish economy in the coming months.

“With interest rates hovering around 4 percent, rents rising at a near eight-year high, and job growth holding strong – albeit at a more modest pace than earlier this year – the overall demand for buying should stay at a healthy level despite some weakness in the overall economy,” Yun says.

Here’s a closer look at how pending home sales fared in September across the country:

  • Northeast: pending home sales dropped 4 percent compared to last month but are 3.9 percent above year ago levels.
  • Midwest: pending home sales declined 2.5 percent month-over-month but are 4.3 percent higher than year ago levels.  
  • South: pending home sales fell 2.6 percent and are just 0.1 percent below last September’s levels.
  • West: pending home sales fell slightly by 0.2 percent month-over-month but are 6.6 percent above year ago levels.

Source: National Association of REALTORS®