According to a report from the National Association of Realtors, pending home sales have declined again for the 8th month in a row. The Pending Home Sales Index, which is based on contract signings, has indicated a 1.8% decline for the month of August.
Lawrence Yun, NAR chief economist, says that low inventory continues to contribute to the housing market slowdown. “Pending home sales continued a slow drip downward, with the fourth month over month decline in the past five months,” he said. “Contract signings also fell backward again last month, as declines in the West negatively impacted overall activity,” he said. “The greatest decline occurred in the West region where prices have shot up significantly, which clearly indicates that affordability is hindering buyers and those affordability issues come from lack of inventory, particularly in moderate price points.”
A 3rd quarter report issued from Housing Opportunities and Market Experience (HOME) said a record breaking number of Americans feel now is a great time to sell their homes. This is up significantly where only half of those surveyed a couple of years ago felt that it was a good time to sell. That figure has surged to roughly three quarters now.
Yun had proposed that with prices having been on the rise so fast some sellers were waiting to sell. However, now with buyers starting to retreat, sellers will now begin to list their homes feeling that they should take advantage of the buyer pool before it decreases too much.
On the mortgage front, Yun states that while rates may be rising it should not lead to a hard decline. “We have two opposing factors affecting the market: the negative impact of rising mortgage rates and the positive impact of continued job creation. This should lead to future homes sales staying fairly neutral,” said Yun. “As long as there is job growth, rising mortgage rates will hinder some buyers; but job creation means second or third incomes being added to households which gives consumers the financial confidence to go out and make a home purchase.”
Yun anticipates existing home sales to decrease by 1.6% with a median home price to increase by 4.8% this year. For next year he predicts that existing sales will rise by 2% with home prices rising around 3.5%.