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NAR Reports

Pending home sales stagnate: Good news or bad news?

Contracts signed (pending home sales) remain unchanged in the most recent report: Time to brace for sliding sales, or a steady increase in 2016?

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Pending home sales (contracts signed) rose only 0.2 percent in October, according to the National Association of Realtors (NAR), making for a stagnant month. Is this good news or bad news?

We count this report as good news, given that this index has fallen for the two months prior, that the Northeast and West saw healthy gains. Further, signed contracts are 3.9 percent above October 2014, marking the 14th month in a row of year-over-year gains.

NAR Chief Economist, Dr. Lawrence Yun, says that pending sales have plateaued this fall as buyers struggle to overcome a scant number of available homes for sale and prices that are rising too fast in some markets.

Job markets fueling demand

Dr. Yun notes, “Contract signings in October made the most strides in the Northeast, which hasn’t seen much of the drastic price appreciation1 and supply constraints that are occurring in other parts of the country,” he said. “In the most competitive metro areas – particularly those in the South and West – affordability concerns remain heightened as low inventory continues to drive up prices.”

According to Yun, although contract activity has slightly trended downward since the spring, the ongoing strengthening of several local job markets continues to fuel the improved demand for buying that has now pushed existing-sales above a 5 million sales pace for eight consecutive months.

“Areas that are heavily reliant on oil-related jobs are the exception and have already started to see some softness in sales because of declining energy prices,” adds Yun.

Looking into the crystal ball

Dr. Yun forecasts that demand is expected to “remain stable” for the final months of 2015, which should lead to existing home sales to end the year at its highest pace since 2006.

Home sales are set to rise next year, but Dr. Yun reiterates yet again that ongoing inventory shortages and affordability pressures from rising prices and mortgage rates will likely temper sales growth to around 3 percent (5.45 million) in 2016.

Home prices are expected to slightly moderate from a 6 percent increase in 2015 to 5 percent next year.

“Unless sizeable supply gains occur for new and existing homes, prices and rents will continue to exceed wages into next year and hamstring a large pool of potential buyers trying to buy a home,” says Yun.

#HomeSales

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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