Pending home sales dropped in October, signaling a decline in inventory and a small rise in mortgage rates in October from September, according to the National Association of Realtors. However, despite the slowdown, economic conditions still seem positive.
“While contract signings have decreased, the overall economic landscape remains favorable,” said Lawrence Yun, NAR’s chief economist. “Mortgage rates continue to be low at below 4%, which will attract buyers, employment levels are strong and many recession claims have dissipated.”
NAR’s Pending Home Sales Index (PHSI) fell 1.7% to 106.7 in October. Year-over-year contract signings jumped 4.4%. NAR notes that an index of 100 is equal to the level of contract activity in 2001.
“We still need to address and, more importantly, correct inadequate levels of inventory across the country,” Yun said. “There is no shortage of buyers seeking homes, but a lack of available units continues to drag down the nation’s housing market and overall economy.”
“We risk a lingering shortage of sufficient inventory if homebuilding only continues at its current pace over the next 20 years, when the U.S. population is projected to increase by more than 40 million over this period. Clearly, home builders must step in and construct more housing.”
With the exception of the Northeast, all regional indices saw declines in October. The PHSI in the Northeast rose 1.9% to 95.7 in October, 3.0% higher than a year ago. In the Midwest, the index slid 2.7% to 101.4 last month, 1.8% higher than in October 2018.
Pending home sales in the South decreased 1.7% to an index of 125.3 in October, a 5.1% increase from last October. The index in the West declined 3.4% in October 2019 to 91.9, which is an increase of 7.5% from a year ago.