Pending home sales have now fallen on an annual basis for nine consecutive months in September, according to the latest report from the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 0.5% in September to 104.6, slightly up from 104.1 in August. Unfortunately, year-over-year, contract signings have declined 1%.
NAR Chief Economist Lawrence Yun said that even though we are still seeing year-over-year declines, the latest monthly increase is a good, stabilizing trend.
“This shows that buyers are out there on the sidelines, waiting to jump in once more inventory becomes available and the price is right,” Yun said.
According to Yun, the lack of moderately priced homes and affordability is restraining the housing market, however when observed through the lens of the previous decades, the current affordability climate is still favorable.
“When compared to the year 2000, when the housing market was considered very healthy, and home sales figures were roughly equivalent and the affordability conditions were much lower compared to now,” Yun added. “So even though affordability has been falling recently, the demand for housing should remain steady.”
Yun also pointed out that although the economy is thriving, it has yet to have a substantial impact on the real estate market. However, he believes that this may soon change.
“The general condition of the economy is excellent, it simply has not lifted home sales this year,” Yun said. “Home prices are still rising, so people who are purchasing are still seeing wealth gains.”
Cities experiencing the largest increase in listings in September 2017 and 2018 included Columbus, Ohio; Seattle-Tacoma-Bellevue, Washington; San Diego-Carlsbad, California and San Francisco-Oakland-Hayward, California, according to Realtor.com.
With rising mortgage rates and high prices, conversations about the possible benefits of renting over buying have begun to pop up; however, Yun believes that homeownership is still the path to long-term financial health.
“Excluding periods of subprime lending, homeownership has consistently lead to wealth gains,” Yun explained. “If people are willing to purchase a home within their budget, they will likely continue to accumulate equity.”
The PHSI in the Northeast decreased 0.4% to 92.3 in September and is 2.7% lower than 2017. The Midwest index climbed 1.2% to 102.4 but is still 1.1% lower than this time last year.
Lastly, pending home sales in the South declined 1.4% to 119.6 but remain 3.3% higher than 2017. The index in the West increased 4.5% to 93.1 and plummeted 7.4% from last year.