Pending homes sales ticked upward in July, but the latest data shows that trend was unable to sustain itself in August. For the third time in the last four months, pending sales numbers fell month-over-month, with July the lone exception.
The Pending Home Sales Index (PHSI), a predictive index tracked by the National Association of Realtors (NAR), also dropped from July to August and is at its lowest point since January 2016. The index is 0.2 percent below the level it was at during the same period of 2015.
Industry watchers hoped that July’s gains were a sign of a new trend in the market. With actual sales numbers and the PHSI both dropping back down in August, a decline definitely seems to be the bigger overall trend throughout most of 2016.
What’s Hurting Pending Sales?
NAR’s chief economist says low housing inventory is playing a key role in the wind going out of the sails of the market. Apart from the Northeast, where Yun says higher inventory is giving potential homebuyers more options and better success in signing contracts, the rest of the nation is dealing with a tight supply of available homes.
According to NAR, a growing percentage of prospective homebuyers appear to be either experiencing doubt due to steeper prices or put off by the level of competition for the relatively small number of listings that fit their budgets.
Considering that the housing inventory in America is on a 15-month streak of year-over-year decline, it should come as no shock the market is in need of an infusion of new home construction. Yun and other experts agree, without that, the housing recovery may stall.
The latest data shows that home prices are on a 54-month streak of year-over-year increases. August numbers revealed more than a five percent increase in that month alone. But, can it continue with the current conditions?
The NAR economist said the expected seasonal listing decline throughout the winter months ahead could intensify the price and inventory problems of the marketplace. In other words, Yun believes it could get even worse for buyers.
A Bright Spot
The outlook isn’t gloomy for buyers everywhere. As mentioned earlier, inventory in the Northeast part of the country is at a higher level. Thanks to that fact, the PHSI for that region rose to 98.1 in August (a 1.3 percent increase). Prices and inventory are expected to remain stable throughout the winter.
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