Inventory Woes Drain Momentum
September 27, 2017
Pending home sales receded last month for the fifth time in six months and will likely pull existing sales for the year below the pace set in 2016, according to the National Association of REALTORS®’ forward-looking indicator, which is based on contract signings. NAR’s Pending Home Sales Index fell 2.6 percent in August to a 106.3 reading. The index is now at its lowest reading since January 2016.
The summer’s low supply levels have drained all of the housing market’s momentum over the past year, says Lawrence Yun, NAR’s chief economist. “August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,” Yun says. “Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search.”
Hurricane Harvey’s damage to the Houston region also contributed to a decline in contract signings in the region in August. Hurricane Irma’s destruction in Florida this month is expected to slow overall sales even more in the South going forward, NAR reports.
Yun concludes that the housing market has essentially stalled. As such, NAR tweaked its existing-home sales forecasts. The association now expects existing-home sales to finish out 2017 at around 5.44 million, which is about 0.2 percent below the pace set in 2016 (5.45 million).
“The supply and affordability headwinds would have likely held sales growth just a tad above last year, but coupled with the temporary effects from Hurricanes Harvey and Irma, sales in 2017 now appear will fall slightly below last year,” Yun says. “The good news is that nearly all of the missed closings for the remainder of the year will likely show up in 2018, with existing sales forecast to rise 6.9 percent.”
Updated: September 18, 2019