Pending home sales in US fall again to lowest level since January

After bouncing back in July, pending home sales in the United States cooled in August for the third time in four months, taking them to their lowest level since January.

The latest pending home sales index from the National Association of Realtors, a forward looking indicator based on contract signings, fell by 2.4% to 108.5 in August from a downwardly revised 111.2 in July and is now 0.2% lower than August 2015.

According to Lawrence Yun, NAR chief economist, lower supply levels have affected 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,’ he 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,’ he added.

Yun also pointed out that evidence is piling up that without more new home construction the current housing recovery could stall. Housing inventory has declined year on year for 15 months in a row.

The data shows that properties in August typically sold 11 days quicker than in August 2015 and after increasing 5.1% last month, existing home prices have risen year on year for 54 consecutive months.

‘There will be an expected seasonal decline in new listings in coming months, which could accelerate price appreciation and make finding an affordable home even more of a struggle for would-be buyers,’ Yun explained.

Earlier this month, NAR released a new study that revealed single family home construction is not keeping pace with job creation and is lacking overall in 80% of measured metro areas. When combined with the scant supply levels for existing homes, these tight inventory conditions continue to hamper affordability in many of the largest cities in the country, especially those in the West.

‘Given the current conditions, there’s not much room for sales to march again towards June’s peak cyclical sales pace,’ Yun said, adding that following last month’s decline, he expects existing home sales in 2016 to be around 5.36 million, a 2.1% increase from 2015 and the highest annual pace since 2006 while the national median existing home price growth is forecast this year to rise around 4%.

A breakdown of the figures show that pending home sales increased by 1.3% in the Northeast where they are now 5.9% above a year ago while in the Midwest they fell by 0.9% and are 1.7% lower than August 2015.

Pending home sales in the South fell by 3.2% and are now 1.5% lower than last August and in the West they fell 5.3% and are now 0.6% lower than a year ago.