October saw pending home sales take a small step back month to month following gains during the previous two months, the National Association of Realtors (NAR) reported.
The NAR’s Pending Home Sales Index, which is based on contract signings, posted a reading of 106.7, a 1.7% retreat. An index reading of 100 is equal to the level of contract activity in 2001, when the index was benchmarked.
NAR chief economist Lawrence Yun attributed the slight regression to diminishing inventory, as well as to a small increase in interest rates from September to October.
“While contract signings have decreased, the overall economic landscape remains favorable,” said Yun. “Mortgage rates continue to be low at below 4% – which will attract buyers – [while] employment levels are strong and many recession claims have dissipated.”
Across the country, three of four regions reported drops in month-over-month contract activity, as sales in the West, Midwest and South fell 3.4%, 2.7% and 1.7%, respectively. The Northeast, on the other hand, saw month-to-month growth, climbing 1.9% in October.
Year-over-year, however, pending sales rose in all four regions, from 1.8% in the Midwest to 7.5% in the West. Overall, contract signings rose grew 4.4% annually.
The most significant buyer attention, Yun said, continues to occur in markets where list prices hover around $250,000 — an affordable price point in most markets nationally. These include large cities like Columbus, Ohio, as well as mid-sized and small cities like Fort Wayne, Indiana; Pueblo, Colorado; and Rochester, New York.
Yun does continue to toll the bell of weak inventory, cautioning that low supply remains a threat to the continued health of the market.
“We still need to address and, more importantly, correct inadequate levels of inventory across the country,” he said. “There is no shortage of buyers seeking homes, but a lack of available units continues to drag down the nation’s housing market and overall economy.”
“We risk a lingering shortage of sufficient inventory if homebuilding only continues at its current pace over the next 20 years, when the U.S. population is projected to increase by more than 40 million over this period. Clearly, home builders must step in and construct more housing.”
