September Pending Home Sales Unchanged

Pending home sales flattened in September as stagnation in the South offset gains elsewhere, the National Association of Realtors reported yesterday.

The groups Pending Home Sales Index held steady at 106.0, its lowest reading since January 2015 (104.7) and down by 3.5 percent below a year ago. The Index has fallen in five of the past six months.

Pending home sales in the South decreased by 2.3 percent to 115.9 in September and by 5.0 percent from a year ago. This decline neutralized gains in other regions. The West saw a 1.9 percent increase in September to 102.7 (2.9 percent below a year ago); the Northeast rose by 1.2 percent to 94.5 (2.4 percent below a year ago); and the Midwest improved by 1.4 percent to 102.9 (2.5 percent lower than a year ago).

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. said the decline comes after a downwardly revised August reading and noted year-ago readings continue to decline as inventory growth lags demand.

“Storm disruptions certainly played a role in this decline,” Vitner said. “However, Florida and Houston should return to their prior pace of sales fairly soon.”

Vitner added continued supply constraints remain an issue for potential buyers of lower-priced homes, while all higher price brackets showed gains. “Unfortunately for lower end buyers, as winter months approach inventory tends to decline,” he said. “This could mean the search for a home could extend into 2018 for these types of buyers.”

NAR Chief Economist Lawrence Yun said demand exceeds supply in most markets, which is keeping price growth high and essentially eliminating any savings buyers would realize from the decline in mortgage rates from earlier this year.

“While most of the country, except for the South, did see minor gains in contract signings last month, activity is falling further behind last year’s pace because new listings aren’t keeping up with what’s being sold,” Yun said. “Hurricane Irma’s direct hit on Florida weighed on activity in the South, but similar to how Houston has rebounded after Hurricane Harvey, Florida’s strong job and population growth should guide sales back to their pre-storm pace fairly quickly.”