Pending home sales dropped slightly in August according to the National Association of Realtors (NAR). The NAR Pending Home Sales Index has now decreased on an annual basis for eight straight months, down 1.8 percent to 104.2 in August from 106.1 in July. Additionally, contract signings are down 2.3 percent year over year.
According to Lawrence Yun, NAR Chief Economist, the housing market slowdown has been impacted in part by the low inventory.
“Pending home sales continued a slow drip downward, with the fourth month over month decline in the past five months,” said Yun.
“Contract signings also fell backward again last month, as declines in the West negatively impacted overall activity,” he added. “The greatest decline occurred in the West region where prices have shot up significantly, which clearly indicates that affordability is hindering buyers and those affordability issues come from lack of inventory, particularly in moderate price points.”
Additionally, NAR notes that many Americans believe now is a good time to sell. Yun states that a record 77 percent of Americans say now is the best time to sell, up from 55 percent a couple years ago.
Added Yun, “With prices having risen so quickly, many consumers were deciding to wait to list their homes hoping to see additional price and equity gains. However, with indications that buyers are beginning to pull out, price gains are going to decelerate and potential sellers are considering that now is a good time to list and bring more properties to the market.”
Yun also notes that the rise in rates is not likely to deter buyers too much in the coming months.
“We have two opposing factors affecting the market: the negative impact of rising mortgage rates and the positive impact of continued job creation. This should lead to future homes sales staying fairly neutral,” said Yun. “As long as there is job growth, rising mortgage rates will hinder some buyers; but job creation means second or third incomes being added to households which gives consumers the financial confidence to go out and make a home purchase.”
Existing home sales are expected to fall by 1.6 percent to 5.46 million this year, while the national median existing-home price to increase 4.8 percent.
Find the report from NAR here.