The National Association for Realtors (NAR) released its latest Pending Home Sales Index for October today, showing that pending home sales experienced a slight decline in last month, dropping by 1.1% from September.
Only states in the South had month-over-month gains. Despite this decline, contract signings are still 20.2% higher nationally than they were a year ago, and all regions of the U.S. experienced year-over-year increases in the double digits. While The Pending Home Sales Index (PHSI) experienced overall increases from last year, there may be signs that things are slowing down. October marks the second consecutive month of declining contract signings.
Realtor.com’s Senior Economist, George Ratiu, says “buyers found that tight inventory and steeply rising prices outpaced record-low mortgage rates,” which is likely one explanation for the decline in contract signings last month.
The low supply and high demand for homes have made housing affordability a huge challenge for Americans this year.
"The combination of these factors – scarce housing and low rates – plus very strong demand has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers, who don't have the luxury of using housing equity from a sale to use as a down payment," Lawrence Yun, NAR's Chief Economist, said in a press release. "Work-from-home flexibility has also increased the demand for both primary and secondary homes."
The Northeast PHSI fell 5.9% to 112.3 in October. This is still an 18.5% increase from last year. In the Midwest, the index dropped by 0.7% to 119.6 that same month, but this was still an increase of 19.6% from October 2019.
While the South was the only region with an increase in its PHSI, the increase was extremely small—rising only 0.1% to an index of 151.1 last month. This was an increase of 21.0% from October of last year. As for states in the West, the October index was unchanged from September at 116.8. This is a 20.8% increase from October 2019.
“Demand for homes remains unusually strong as we head into winter, based on realtor.com traffic, ignoring the typical seasonal slowdown,” Ratiu said. “However, the number of homes for sales hovered near historic lows, which led to steep price increases of 13.1% for the week before Thanksgiving. Looking ahead, storm clouds are gathering, as millions of Americans will face the expiration of eviction protections, as well as the disappearance of pandemic unemployment insurance benefits. This winter could pose an unusual challenge for many people across the country unless Congress takes significant actions.”