With home sales jumping 4.5 percent in the West, pending home sales ended up rising 0.5 percent in September, according to the National Association of Realtors (NAR).
Pending home sales are contracts signed on homes for sale, so economists watch this indicator closely as a measure of the housing market’s health and an indicator of what will happen next.
But NAR is quick to point out that this slight uptick does not overshadow nine consecutive month of annual decreases.
NAR Chief Economist, Dr. Lawrence Yun calls it a “stabilizing trend,” that proves “buyers are out there on the sidelines, waiting to jump in once more inventory becomes available and the price is right.”
Beating a dead horse, Dr. Yun again points to the lack of inventory and affordability factors as restrictive, but asserting that the demand for housing “should remain steady.”
But with all other facets of the economy firing on all cylinders, why is the real estate market not exceeding expectations? Simple supply and demand – with homeowners seeing healthy gains in recent years, prices continue to rise alongside interest rates, and combined with inventory levels remaining tight, some buyers are simply left on the sidelines, regardless of their desire to buy.
Dr. Yun says this is about to change, pointing to annual increases in inventory in many major markets. In the past, he has noted one method to alleviate the supply/demand imbalance is for homebuilders to step up production, but as that has not happened, there is no expediting the natural process.
Further, performance varies between regions with pending home sales jumping 4.5 percent in the West (while dipping to 7.4 percent below a year ago), and 1.2 in the Midwest (only 1.1 percent below last year). Meanwhile, falling 0.4 percent in the Northeast (now 2.7 percent below September 2017), and 1.4 percent in the South (down 3.3 percent annually).
The wheels of the market are currently slowly moving, and the fed is expected to increase rates one more time this year, but NAR’s forward-looking indicator reveals a decent close to 2018.
