Pending home sales increased only slightly in October, but enough to hit the highest pace since July this year, according to the most recent report from the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased slightly by 0.1% to 110 in October. This is up from a downwardly-revised 109.9 in September, and up 1.8% from last year’s 108.1. This is the highest the index has been since July this year.
“Most of the country last month saw at least a small increase in contract signings and more notably, activity in all four major regions is up from a year ago,” NAR Chief Economist Lawrence Yun said. “Despite limited listings and steadfast price growth that’s now carried into the fall, buyer demand has remained strong because of the consistently reliable job creation in a majority of metro areas.”
But the constricted supply continues to drive increases in home prices. In October, 40% of homes sold at or above list price. This is up from 33% of homes last October.
“Many of the successful shoppers in October likely had to move fast and outbid others for the few listings available in the affordable price range,” Yun said. “Those obtaining a mortgage last month were likely the last group of buyers to lock in a rate near historically low levels now that rates have marched to around 4% since the election.”
But buyer demand remains strong, as seen by the uptick in the PHSI. Yun predicted 2016 will close out at a pace of 5.36 million existing home sales, an increase from last year’s 5.25 million and the highest pace since 2006.
“Low supply has kept prices elevated all year and has put pressure on the budgets of buyers,” Yun said. “With mortgage rates expected to rise into next year and put added strain on affordability, sales expansion will be contingent on more inventory coming onto the market and continued job gains.”