“There is no shortage of buyers seeking homes,” said Dr. Lawrence Yun, chief economist at the National Association of Realtors (NAR), “but a lack of available units continues to drag down the nation’s housing market and overall economy.”
In response to the pending home sales index (PHSI) dipping 1.7% in October after two months of increases, Dr. Yun continues shining a light on tight inventory levels as a primary (and we would note, plaguing) factor in housing.
While pending home sales fell slightly from the previous month, they’re actually up 4.4% from October of last year in all regions of America. The PHSI rose in the Northeast 1.9% for the month, and fell 2.7% in the Midwest, 1.7% in the South, and 3.4% in the West. But for the year, the Northeast is up 3.0%, the Midwest rose 1.8%, the South jumped 5.1%, and the West spiked 7.5%.
This forward-looking indicator tracks contracts signed and is used to gauge the health of the market in coming months.
Dr. Yun noted that tight inventory is not the only challenge – mortgage rates rose slightly between September and October. “While contract signings have decreased, the overall economic landscape remains favorable,” he stated. “Mortgage rates continue to be low at below 4% – which will attract buyers – employment levels are strong and many recession claims have dissipated.”
That said, the Mortgage Bankers Association (MBA) reported today that mortgage applications for last week are actually up 1.5%, and with fluctuations this mild, there still appears to be optimism in the market.
“Mortgage rates stayed below 4 percent for the second straight week and borrowers responded positively,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
Dr. Yun concludes with sounding the warning bell, making it clear that if we do not address inventory levels, current homebuilding won’t be able to support the expanding population in the coming decades.
For now, however, Kan points out that “with roughly five weeks of reporting data left in 2019, the mortgage market is on track for its best year for originations since 2007.”