WASHINGTON – Pending home sales fell slightly in October, according to the National Association of Realtors. Contract activity was mixed among the four major U.S. regions, with the only positive month-over-month growth happening in the South – but each region had year-over-year gains in pending home sales transactions.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – fell 1.1% to 128.9 in October, the second straight month of decline. Year-over-year, contract signings rose 20.2%. An index of 100 is equal to the level of contract activity in 2001.
“Pending home transactions saw a small drop off from the prior month but still easily outperformed last year’s numbers for October,” says Lawrence Yun, NAR’s chief economist. “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.”
The inventory of homes for sale and mortgage rates are both now at historic lows, according to Yun.
“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,” says Yun. “Work-from-home flexibility has also increased the demand for both primary and secondary homes.”
Regional breakdown: The Northeast PHSI slid 5.9% to 112.3 in October, but it’s an 18.5% increase from a year ago. In the Midwest, the index fell 0.7% to 119.6 month-to month, but it was up 19.6% year-to-year.
Pending home sales in the South increased 0.1% to an index of 151.1 month-to-month, but they surged 21.0% higher year-to-year. The index in the West remained the same in October at 116.8, but it rose 20.8% year-to-year.
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