While pending home sales remained unchanged from August to September, they fell annually in all major U.S. regions, according to the latest report from the National Association of Realtors.
But while existing home sales continue to struggle, new home sales are partially offsetting the drop. New home sales unexpectedly surged to a 10-year high in September, the latest report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development showed.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, came in at 106 in September, unchanged from the downwardly revised August figure. This represents the lowest reading since January 2015, and with its annual drop of 3.5%, has now fallen annually in five of the past sixe months.
“Demand exceeds supply in most markets, which is keeping price growth high and essentially eliminating any savings buyers would realize from the decline in mortgage rates from earlier this year,” NAR Chief Economist Lawrence Yun said. “While most of the country, except for the South, did see minor gains in contract signings last month, activity is falling further behind last year’s pace because new listings aren’t keeping up with what’s being sold.”
“Hurricane Irma’s direct hit on Florida weighed on activity in the South, but similar to how Houston has rebounded after Hurricane Harvey, Florida’s strong job and population growth should guide sales back to their pre-storm pace fairly quickly,” Yun said.
One expert said this lack of change from August to September means October’s existing home sales are likely to once again fall below last year’s levels.
“September’s existing home sales figure was below the year-earlier figure for the first time in more than a year, and with pending sales also below year-ago levels it is likely that October existing sales will remain below year-earlier levels,” Nationwide Chief Economist David Berson said. “There was probably some negative influence from the hurricanes, as the South region was the only one that saw a drop in September pending home sales.”
Yun explained the ongoing supply constraints continue to hold back home sales at the lower end of the market. During September, first-time buyers made up 29% of all transactions – matching the lowest share in exactly two years.
“Buyers looking for a little relief from the stiff competition from over the summer may unfortunately be out of luck in the coming months,” Yun said. “Inventory starts to decline heading into the winter, and many would-be buyers from earlier in the year are still on the hunt to find a home.”
Another expert agreed inventory is at the root of the problem for low home sales, saying the total sales for the year could decrease from 2016 if the market doesn’t see a shift.
“It’s an all-too-familiar tale of low inventory: Pending home sales momentum was flat as small pickups in activity in the Northeast, Midwest, and West were offset by post-hurricane weakness in the South,” realtor.com Chief Economist Dannielle Hale said.
“People in all four regions signed fewer home contracts compared to one year ago, as would-be buyers struggle to find the right place among the limited number of homes for sale,” Hale said. “While last fall existing home sales finished on a strong note, this year’s data suggest that sales are likely to be weaker this year unless inventories improve.”