US pending homes sales fall month on month after record breaking 2015

Pending home sales in the United States fell by 2.5% in the first month of 2016 following the highest average year in nearly a decade, the latest index shows.

On the South saw sales rise, but sales are still 1.4% higher than they were a year ago, according to the forward looking index from the National Association of Realtors.

Although the index has increased year on year for 17 consecutive months, last month’s annual gain was the second smallest and NAR chief economist Lawrence Yun said that a myriad of reasons have contributed to the drop in January.

‘While January’s blizzard possibly caused some of the pullback in the Northeast, the recent acceleration in home prices and minimal inventory throughout the country appears to be the primary obstacle holding back would be buyers. Additionally, some buyers could be waiting for a hike in listings come spring time,’ he explained.

Existing home sales increased last month and were considerably higher than the start of 2015, but price growth quickened to 8.2%, the largest annual gain since April 2015 when it was 8.5%.

While the hope is that appreciating home values will start to entice more homeowners to sell, Yun said that supply and affordability conditions won’t meaningfully improve until home builders start ramping up production, especially of homes at lower price points.

‘First time buyers in high demand areas continue to encounter instances where their offer is trumped by cash buyers and investors. Without a much needed boost in new and existing homes for sale in their price range, their path to home ownership will remain an uphill climb,’ Yun pointed out.

Existing homes sales this year are forecast to be around 5.38 million, an increase of 2.5% from 2015. The national median existing home price for all of this year is expected to increase between 4% and 5%. In 2015 existing home sales increased 6.3% and prices rose 6.8%.

A breakdown of the figures show that the index in the Northeast declined 3.2% but is still 10.9% above a year ago. In the Midwest the index fell 4.9% but is still 1.4% above January 2015.

Pending home sales in the South inched up 0.3% but remain 1.3% lower than last January. The index in the West decreased 4.5% but is still 0.4% above a year ago.