Pending home sales (contracts signed) hit their lowest level since January after rebounding in July, marking the third drop in four months, according to the National Association of Realtors.
Falling 2.4 percent in August, this index is used to tell how many closings are to be expected in the near future.
Taking the wind out of the momentum
Dr. Lawrence Yun, NAR chief economist, says suffering supply levels have taken the wind out of the momentum the housing market experienced earlier this year.
“Contract activity slackened throughout the country in August except for in the Northeast, where higher inventory totals are giving home shoppers greater options and better success signing a contract,” he said.
“In most other areas, an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the miniscule number of affordable listings,” added Yun.
Only new home construction can save us
According to Yun, evidence is piling up that without more new home construction the current housing recovery could stall.
For 15 consecutive months, inventory has declined, existing home prices have risen year-over-year for 54 consecutive months, and properties in August typically sold 11 days faster than in August 2015.
“There will be an expected seasonal decline in new listings in coming months, which could accelerate price appreciation and make finding an affordable home even more of a struggle for would-be buyers,” added Yun.
Yun projects existing home sales in 2016 to be 2.1 percent higher than 2015, and the median home price to rise roughly 4.0 percent.
Sales fell 5.3 percent in the West
Pending home sales rose 1.3 percent in the Northeast, marking a 5.9 percent rise above a year ago.
Contracts signed slid 3.2 percent in the South, and are now 1.5 percent lower than August 2015.
In the Midwest, the index only dipped 0.9 percent, and is now 1.7 percent below this time last year.
The index in the West fell 5.3 percent in August, and is now 0.6 percent lower than a year ago.