Pending homes sale fell considerably in the US in January, latest index shows
Pending home sales in the United States cooled considerably in January to their lowest level for over three years after seeing a modest three month rise in activity, the latest index report shows.
All major regions recorded monthly and annual declines in contract signings with the pending home sales index from the National Association of Realtors falling 4.7% month on month. It is now 3.8% below a year ago, its lowest since October 2014.
‘The economy is in great shape, most local job markets are very strong and incomes are slowly rising, but there’s little doubt last month’s retreat in contract signings occurred because of woefully low supply levels and the sudden increase in mortgage rates,’ said Lawrence Yun, NAR chief economist.
‘The lower end of the market continues to feel the brunt of these supply and affordability impediments. With the cost of buying a home getting more expensive and not enough inventory, some prospective buyers are either waiting until listings increase come spring or now having to delay their search entirely to save up for a larger down payment,’ he explained.
‘Even though contract signings were down, realtors indicated that buyer traffic in most areas was up January compared to a year ago. The exception was likely in the Northeast, where the frigid cold snap the first two weeks of the month may have contributed some to the region’s large decline,’ he added.
The index also shows that the number of available listings at the end of January was at an all-time low for the month and 9.5% below a year ago. In addition to new home construction making progress closer to its historical annual average of 1.5 million starts, Yun believes that other factors must start occurring to alleviate the excruciatingly low supply levels that are slowing sales such as institutional investors beginning to unload their portfolio of single family properties back onto the market, and more hesitant home owners deciding to sell.
‘As new multi-family supply catches up with demand and slows rents, some large investors may begin putting their holdings of affordable single family homes up for sale, which would be great news, particularly for first-time buyers,’ said Yun.
‘Furthermore, sellers last year typically stayed in their home for 10 years before selling, an all-time high, although higher mortgage rates will likely discourage some home owners from wanting a new home with a higher rate, there are possibly many pent-up sellers who may look to finally trade-up or move down this year,’ he pointed out.
Yun’s forecast was for existing home sales to be around 5.50 million in 2018, roughly unchanged from 2017. The national median existing home price this year is expected to increase around 2.7%. In 2017 existing sales increased 1.1% and prices rose 5.8%.
A breakdown of the figures shows that sales in the Northeast fell 9% in January and are now 12.1% below a year ago while in the Midwest the index fell 6.6% and is now 4.1% lower than January 2017.
Pending home sales in the South declined 3.9% and are now 1.1% lower than last January while in the West they decreased 1.2% in January and are 2.5% below a year ago.