It’s been eight months in which pending home sales volumes have fallen, reports the National Association of Realtors (NAR). This may be a sign more buyers are being priced out of the market, NAR warned. The western United States had the largest declines—the region in which home prices have risen the most, according to NAR Chief Economist Lawrence Yun. “This clearly indicates that affordability is hindering buyers and those affordability issues come from lack of inventory, particularly at moderate price points.”
The Pending Home Sales Index is Falling
NAR’s Pending Home Sales Index also fell in August. The Pending Home Sales Index measures the volume of contract signings and predicts future home sales trends. Year-over-year, the index reading was down 2.3 percent, reading 104.2. Readings above 100 indicate historically high levels of home sales activity, but falling numbers indicate declining home sales volumes.
The Southeast posted an increased volume of home sales of 1.3 percent year-over-year. The index measure for the Southeast alone was 121.3. By comparison, the western United States measured 89.1, with a year-over-year decline of 11 percent.
Prices Still Rising, but Not as Fast
Rising home prices may have led consumers to hold off on listing their homes in hopes of gaining more equity. “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 market,” Yun predicted. He does not believe rising mortgage rates will lead to a significant decline in buyers’ desire to purchase a home.
“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.”
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