According to the National Association of Realtors (NAR), pending home sales declined for the fourth consecutive month in September, which the trade group says is due to higher mortgage interest rates and higher home prices, which have curbed buying power.
The Pending Home Sales Index fell 5.6 percent in September from a downwardly revised 107.6 in August, and is 1.2 percent below September 2012. The index is now at its lowest level since December 2012, which spells for fewer closings in coming months.
The Role of the Government Shutdown
NAR’s chief economist, Lawrence Yun, said concerns over the government shutdown also played a role.
“Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity,” he said. “In addition, government and contract workers were on the sidelines with growing insecurity over lawmakers’ inability to agree on a budget. A broader hit on consumer confidence from general uncertainty also curbs major expenditures such as home purchases.”
Yun notes this is the first time in 29 months that pending home sales weren’t above year-ago levels. “This tells us to expect lower home sales for the fourth quarter, with a flat trend going into 2014. Even so, ongoing inventory shortages will continue to lift home prices, though at a slower single-digit growth rate next year.”
Regional Performance Varied
In the Northeast, signed contracts dipped 9.6 percent for the month, falling 6.4 percent from last year. Signed contracts dipped 9 percent in the West this month, down 9.8 percent compared to September 2012. Pending homes in the Midwest fell 8.3 percent, but are actually 5.7 percent higher than September 2012. In the South, pending home sales only fell 0.4 percent for the month, and have risen 2 percent for the year.
According to NAR, total existing-home sales this year will be 10 percent higher than 2012, reaching more than 5.1 million, and are likely to hold even in 2014. They forecast that the national median existing-home price will rise 11 to 11.5 percent for all of 2013, but moderate to a 5 to 6 percent gain in 2014.
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