Pending home sales decreased in August for the fifth time in six months, and was especially slow in areas hit by hurricanes Harvey and Irma, according to the latest report from the National Association of Realtors.
In fact, this slow down even caused NAR to downgrade is overall forecast for the year, the report explained. Existing home sales may now see a decrease from 2016 to 2017, instead of the previously forecasted increase.
NAR Chief Economist Lawrence Yun said the low levels of housing supply over the summer now officially drained all the housing market’s momentum. He now forecasts existing home sales to close the year at 5.44 million, down 0.2% from 5.45 million in 2016. Last month, Yun predicted home sales would close out 2017 at 5.49 million.
Here's the bad news, from the release, in a nutshell:
"With little relief expected from the housing shortages that continue to plague several areas, Yun believes the housing market has essentially stalled. Further complicating any sales improvement in the months ahead is the fact that Hurricane Harvey’s damage to the Houston region contributed to the South’s decline in contract signings in August, and will likely continue to do so in the months ahead. Furthermore, the temporary pause in activity in Florida this month in the wake of Hurricane Irma will slow overall sales even more in the South."
The Pending Home Sales Index, a forward-looking indicator based on contract signings, dropped 2.6% to 106.3 in August, down from 109.1 in July. This represents a decrease of 2.6% from last year, is the fourth annual decrease in four of the past five months, and marks the lowest reading since January 2016.
The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales, according to NAR.
“August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,” Yun said. “Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search.”
Yun also explained there is little hope for an increase in the next few months as Hurricane Harvey’s damage will continue to slow sales in the South and Florida continues to overcome the effects of Hurricane Irma.
“The supply and affordability headwinds would have likely held sales growth just a tad above last year, but coupled with the temporary effects from Hurricanes Harvey and Irma, sales in 2017 now appear will fall slightly below last year,” Yun said. “The good news is that nearly all of the missed closings for the remainder of the year will likely show up in 2018, with existing sales forecast to rise 6.9%.”