August Pending Home Sales Bounce Back
Pending home sales rebounded in August, recording significant gains after two prior months of declines, the National Association of Realtors reported Wednesday.
The Pending Home Sales Index (www.nar.realtor/pending-home-sales), a forward-looking indicator of home sales based on contract signings, increased by 8.1% to 119.5 in August. Year-over-year, however, signings dipped 8.3%.
Each of the four major U.S. regions saw month-over-month growth in contract activity. However, they also reported decreases in transactions year-over-year, with the Northeast being hit hardest, enduring a double-digit drop. In the Northeast, pending home sales rose by 4.6% to 96.2 in August but fell by 15.8% from a year ago. In the Midwest, the index climbed 10.4% to 115.4 last month, but fell by 5.9% from a year ago.
Pending home sales in the South increased by 8.6% to 141.8 in August, but fell by 6.3% from a year ago. Sales in the West grew by 7.2% in August to 107.0, but fell by 9.2% from a year prior.
“Rising inventory and moderating price conditions are bringing buyers back to the market,” said Lawrence Yun, NAR chief economist. “Affordability, however, remains challenging as home price gains are roughly three times wage growth.”
Such an imbalance in the market is unsustainable over the long-term, Yun said. “The more moderately priced regions of the South and Midwest are experiencing stronger signing of contracts to buy, which is not surprising,” he said. “This can be attributed to some employees who have the flexibility to work from anywhere, as they choose to reside in more affordable places.”
Odeta Kushi, Deputy Chief Economist with First American Financial Corp., Santa Ana, Calif., noted pending contracts are good early indicators of upcoming sales closings.
“Increased inventory of homes for sale, near historic low mortgage rates and favorable demographics means more housing demand,” Kushi said. “Weekly mortgage applications data also signal increasing demand. For the week of September 24, [the Mortgage Bankers Association reported] seasonally adjusted purchase applications are 6.3% higher than two years ago. This is a strong purchase market and the uptick in inventory is bringing back some buyers who pulled back during peak frenzy.”
