Pending home sales fell slightly in October from the previous month, according to a new report from the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, fell 1.1% to 128.9 in October, marking the second straight month of decline.
While contract signings were still up a whopping 20.2% from October 2019, high home prices may be finally catching up, shutting some buyers out of the market.
“Pending home transactions saw a small drop off from the prior month but still easily outperformed last year’s numbers for October,” said NAR Chief Economist Lawrence Yun in a press release. “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.”
According to Yun, shrinking inventory and low mortgage rates are to blame for record high home prices.
“The combination of these factors – scarce housing and low rates – plus very strong demand has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers, who don’t have the luxury of using housing equity from a sale to use as a down payment,” added Yun. “Work-from-home flexibility has also increased the demand for both primary and secondary homes.”
Looking at the four major U.S. regions, only the South saw positive month-over-month growth, although each region achieved year-over-year gains in pending home sales transactions.
In the Midwest, the index fell 0.7% to 119.6 last month, up 19.6% from October 2019.