Will Slip in Contract Signings Be Long-Term?
May 31, 2018
Pending home sales decreased in April to their third lowest level over the past year, the National Association of REALTORS® reported Thursday. The dip comes after two consecutive months of modest increases in contract signings. All major regions posted declines in contract activity last month, NAR’s report showed.
NAR’s Pending Home Sales Index, an indicator based on contract signings, decreased 1.3 percent to a reading of 106.4 in April. The index is now down 2.1 percent on an annualized basis for the fourth consecutive month.
“Pending sales slipped in April and continued to stay within the same narrow range with little signs of breaking out,” says Lawrence Yun, NAR’s chief economist. “Feedback from REALTORS®, as well as the underlying sales data, reveal that the demand for buying a home is very robust. Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher. The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels.”
Yun also added that rising mortgage rates and higher gas prices could also cause more potential buyers to pause.
“The combination of paying extra at the pump, while also needing to save more for a down payment because of higher rates and home prices, may weigh on the psyche of those looking to buy,” Yun says. “For now, the economy is very healthy, job growth is holding steady, and wages are slowly rising. However, it all comes down to overall supply. If more new and existing homes are listed for sale, it would allow home prices to moderate enough to stave off inflationary pressures and higher rates.”
Updated: October 17, 2018