Pending home sales recede in October
A shortage of affordable inventory continues to impact the housing market.
Following two months of increases, pending home sales fell in October, the National Association of Realtors reported today.
The Pending Home Sales Index (PHSI) fell 1.7% to 106.7 in October. Year-over-year contract signings jumped 4.4%. An index of 100 is equal to the level of contract activity in 2001. Pending home sales are also up nationally in all regions compared to a year ago.
“While contract signings have decreased, the overall economic landscape remains favorable,” said Lawrence Yun, chief economist of the NAR. “Mortgage rates continue to be low at below 4% – which will attract buyers – employment levels are strong and many recession claims have dissipated.”
Pointing to data from active listings at realtor.com, Yun noted that markets where listing prices are around $250,000 – an affordable price point in most markets nationally – are drawing some of the most significant buyer attention, including Fort Wayne, Ind., Pueblo, Colo., Columbus, Ohio, Rochester, N.Y., and Lafayette, Ind.
“We still need to address and, more importantly, correct inadequate levels of inventory across the country,” Yun said. “There is no shortage of buyers seeking homes, but a lack of available units continues to drag down the nation’s housing market and the overall economy.”
The PHSI in the Northeast rose 1.9% to 95.7 in October, 3.0% higher than a year ago. In the Midwest, the index slid 2.7% to 101.4 last month, 1.8% higher than in October 2018.
Pending home sales in the South decreased 1.7% to an index of 125.3 in October, a 5.1% increase from last October. The index in the West declined 3.4% in October 2019 to 91.9, which is an increase of 7.5% from a year ago.
But Yun said the inventory shortage must be addressed or there could be long-term ramifications.
“We risk a lingering shortage of sufficient inventory if homebuilding only continues at its current pace over the next 20 years when the U.S. population is projected to increase by more than 40 million over this period,” Yun explained. “Clearly, home builders must step in and construct more housing.”
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