Low Supply Levels Restrain Contract Signings
September 29, 2016
Pending home sales softened in August for the third time in four months, and retreated to the lowest level since January, the National Association of REALTORS® reported Thursday.
Here’s a closer looking at August’s reading of NAR’s Pending Home Sales Index across the country:
- Northeast: pending home sales increased 1.3 percent to a reading of 98.1 in August, and are now 5.9 percent above a year ago.
- Midwest: pending home sales dropped 0.9 percent to 104.7 in August, and are now 1.7 percent lower than a year ago.
- South: pending home sales dropped 3.2 percent to an index reading of 119.8 in August and are now 1.5 percent lower than a year ago.
- West: pending home sales fell 5.3 percent in August to 102.8, and are now 0.6 percent lower than a year ago.
NAR’s Pending Home Sales Index – a forward-looking indicator based on contract signings – dropped 2.4 percent last month to a reading of 108.5. Lawrence Yun’s, NAR’s chief economist, says that a limited number of homes for sale continue to stifle the housing market.
“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.”
Without more new home construction, the current housing recovery could stall, NAR said in its latest release. For 15 consecutive months, housing inventory has dropped year-over-year. In August, properties typically sold 11 days faster than a year ago. What’s more, due to the limited supplies, existing-home prices continue to rise.
“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 says.
NAR released a study earlier this month that showed single-family home construction is failing to keep pace with job creation. Its report showed that home construction is muted in 80 percent of the metro areas it tracked, and is most problematic in the West.
“Given the current conditions, there’s not much room for sales to march again towards June’s peak cyclical sales pace,” Yun says.
Updated: October 15, 2019