The housing market is now two-thirds of the way back to normal, according to Trulia’s (TRLA) latest Housing Barometer report. While existing-home sales have finally found their way back to normal levels, construction activity continues to lag.
"The recovery is not a straight line: it moves through different phases," said Jed Kolko, Trulia’s chief economist.
The current phase for pending home sales shows a drop in August sales as the market remains impacted by tight inventory, rising interest rates, escalating prices and tighter mortgage lending guidelines.
The National Association of Realtors' pending home sales index took a slight dip in August, falling 1.6% from an index score of 109.4 in July to 107.7 in August. Nonetheless, August’s numbers were still 5.8% above August 2012 levels, when the index score hovered at 101.8.
Lawrence Yun, NAR chief economist, believes the decline was expected following elevated levels of closed existing-home sales at the end of summer.
"Sharply rising mortgage interest rates in the spring motived buyers to make purchase decisions, culminating in a six-and-a-half-year peak for sales that were finalized last month," Yun said.
The Northeast is the only region that saw an increase in pending home sales. The PHSI rose 4.0% to 84.8 in August in the Northeast — 5.1% above year-ago levels.
The Midwest, South and West all saw declines in pending home sales. The index fell 1.4% to 111.6 in the Midwest in August, which is 13.8% higher than in August 2012.
In the South, pending home sales fell 3.5% to an index score of 116.9, although they are still 3.7% above year ago levels. The index in the West fell 1.6% in August to 106.9, but is still 1.7% above August 2012 levels.
Little change is predicted for 2014, despite total existing-home sales expected to increase about 11% to nearly 5.2 million sales.
The national median existing-home price is expected to rise 11% to 12% in 2013, easing to an increase of 5% to 6% next year, with general improvement expected in inventory supplies.
"Moving forward, we expect lower levels of existing-home sales, but tight inventory in many markets will continue to push up home prices in the months ahead," said Yun.
If it's any indicator as to how far the housing market has come, it's now 67% back to normal, Trulia claimed.
"When we created the Housing Barometer eighteen months ago, all measures of the housing recovery were far from normal," said Kolko "Since then, the recovery has surged ahead in many ways but languished in others. Existing home sales are 99% back to normal, while construction is just 40% back to normal. Tracking the recovery’s progress as a single number is not the best approach anymore."