Pending home sales decreased in October after two straight months of increases, according to a new study.
The National Association of Realtors’ (NAR) pending home sales index (PHSI), a forward-looking indicator based on contract signings, revealed that pending home sales fell by 1.7% to 106.7 in October. Meanwhile, year-on-year contract signings jumped 4.4%.
A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale is usually finalized within one or two months of signing.
Lawrence Yun, chief economist at NAR, said that October’s decrease in signings was, in part, due to a decline in inventory and a small rise in mortgage rates from September.
“While contract signings have decreased, the overall economic landscape remains favorable," said Yun. “Mortgage rates continue to be low at below 4% – which will attract buyers – employment levels are strong, and many recession claims have dissipated.”
While optimistic, Yun said that the housing industry still needs to address and correct “inadequate levels of inventory across the country.”
“There is no shortage of buyers seeking homes, but a lack of available units continues to drag down the nation's housing market and overall economy,” he said. “We risk a lingering shortage of sufficient inventory if homebuilding only continues at its current pace over the next 20 years, when the US population is projected to increase by more than 40 million over this period. Clearly, home builders must step in and construct more housing.”