In a different market, home sales slipping would be terrible news, but in this overheated housing market, it’s welcome news. Pending home sales (contracts signed) slipped in July by 1.8%, according to the National Association of Realtors (NAR).
Marking the second month of declines, all regions fell except the West which rose 1.9%. Compared to July of last year, sales fell 8.5%, so why is this good news?
“The market may be starting to cool slightly, but at the moment there is not enough supply to match the demand from would-be buyers,” said Dr. Lawrence Yun, NAR’s Chief Economist. “That said, inventory is slowly increasing and home shoppers should begin to see more options in the coming months.”
Inventory levels have been high for several years now, and housing starts are millions of units behind where they should be, so several markets are overheated.
“Homes listed for sale are still garnering great interest, but the multiple, frenzied offers – sometimes double-digit bids on one property – have dissipated in most regions,” Dr. Yun said. “Even in a somewhat calmer market, a number of potential buyers are still choosing to waive appraisals and inspections.”
NAR reports that 27% of buyers bypassed appraisal and inspection contingencies to speed up the homebuying process.
Pending home sales slid 6.6% in the Northeast, 0.9% in the South, and 3.3% in the Midwest. While a slowing of sales doesn’t fix the inventory crisis, it sure does slightly loosen conditions. It won’t have a strong impact on housing prices, and a 1.8% dip may feel more like stagnant activity, but it truly is a sign of hope.
NAR is pressing lawmakers to take immediate action, from local to federal; they’re pressing for changes to stop the proverbial bleeding, like permitting law adjustments to allow commercial real estate be transformed to residential units in response to the shortage of housing, and builders unable to keep up.
We’ll still see comedic sketches online about the housing market as a reflection of a dip in homebuyer morale, but hopefully we’ll see those slow as well. Fingers crossed.