August Pending Home Sales Slide

Pending home sales fell for the third time in four months in August to their lowest level since January, coming off a more hopeful July report, the National Association of Realtors reported yesterday.

The Pending Home Sales Index fell by 2.4 percent to 108.5 in August from a downwardly revised 111.2 in July and is now slightly lower (0.2 percent) from a year ago (108.7). The index is now at its second lowest reading this year after January (105.4).

Regionally, only the Northeast saw an increase, by 1.3 percent to 98.1 in August and by 5.9 percent from a year ago. In the Midwest, the index decreased by 0.9 percent to 104.7 in August and by 1.7 percent lower from a year ago. Pending sales in the South declined by 3.2 percent to 119.8 in August and by 1.5 percent from a year ago. In the West, the index fell by 5.3 percent to 102.8 and by 0.6 percent from a year ago.

“The moderation suggests existing home sales are likely to remain close to their current pace through the end of the year,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Sales continue to be held back by supply shortages, as contract signings fell the greatest in the West, where inventories are the leanest, and rose in the Northeast, where inventory levels are closest to their long-term norm.”

NAR Chief Economist Lawrence Yun said suffering supply levels have taken the wind out of the momentum the housing market experienced earlier this year.

“Contract activity slackened throughout the country in August except for in the Northeast, where higher inventory totals are giving home shoppers greater options and better success signing a contract,” Yun said. “In most other areas, an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the miniscule number of affordable listings.”

“Pending home sales typically lead existing sales by one or two months,” Vitner said. “The moderation in pending home sales suggests existing home sales are unlikely to breakout in a meaningful way.”