Pending Home Sales Start 2016 Slow

Pending home sales started the new year on a sour note, falling more than anticipated, the National Association of Realtors reported yesterday.

NAR said its Pending Home Sales Index, a forward-looking indicator based on contract signings, fell by 2.5 percent to 106.0 in January from an upwardly revised 108.7 in December; from a year ago, pending sales came in 1.4 percent higher (104.5). NAR said pending sales increased year over year for the 17th consecutive month, albeit at a much slower pace than in previous months.

Regionally, only the South saw an improvement, rising by 0.3 percent to 121.1 in January, but 1.3 percent lower than a year ago. In the Northeast, pending home sales declined by 3.2 percent to 94.5 in January but improved by 10.9 percent from a year ago. In the Midwest the index fell by 4.9 percent to 101.1 but improved by 1.4 percent from a year ago. In the West, pending home sales declined by 4.5 percent but were 0.4 percent higher than a year ago.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said the index is now below its six-month average of 107.7. “On a three-month moving average basis, year-over-year gains in existing home sales are now outpacing pending home sales, which suggests that existing home sales may slow in coming months,” he said. “The recent trend is discouraging given the mild winter weather experienced across much of the country.”

NAR Chief Economist Lawrence Yun, NAR chief economist said a “myriad of reasons” likely contributed to the faltering numbers. “While January’s blizzard possibly caused some of the pullback in the Northeast, the recent acceleration in home prices and minimal inventory throughout the country appears to be the primary obstacle holding back would-be buyers,” he said. “Additionally, some buyers could be waiting for a hike in listings come springtime.”

Yun said while the hope is that appreciating home values will start to entice more homeowners to sell, supply and affordability conditions won’t meaningfully improve until homebuilders start ramping up production, particularly for homes at lower price points.

“First-time buyers in high demand areas continue to encounter instances where their offer is trumped by cash buyers and investors,” Yun said. “Without a much-needed boost in new and existing homes for sale in their price range, their path to homeownership will remain an uphill climb.”