The number of pending home sales declined in August from July as the housing market continued to slow down due in part to persistently low inventory, according to the Pending Home Sales Index (PHSI) released by the National Association of Realtors (NAR)
The PHSI, a forward-looking indicator based on contract signings, fell 1.8% to 104.2 in August from 106.1 in July. With the August decrease, pending home sales have now decreased on an annual basis for eight straight months. Also, contract signings are now down 2.3% year-over-year.
“Pending home sales continued a slow drip downward, with the fourth month over month decline in the past five months,” NAR Chief Economist Lawrence Yun said. “Contract signings also fell backward again last month, as declines in the West negatively impacted overall activity. The greatest decline occurred in the West region where prices have shot up significantly, which clearly indicates that affordability is hindering buyers and those affordability issues come from lack of inventory, particularly in moderate price points.”
Yun also expects that home sales would not see a significant decline despite rising mortgage rates.
“We have two opposing factors affecting the market: the negative impact of rising mortgage rates and the positive impact of continued job creation. This should lead to future homes sales staying fairly neutral,” Yun said. “As long as there is job growth, rising mortgage rates will hinder some buyers; but job creation means second or third incomes being added to households which gives consumers the financial confidence to go out and make a home purchase.”
For 2018, Yun forecasts a 1.6% decline in existing-home sales to 5.46 million and a 4.8% increase in the national median existing-home price. Looking ahead to 2019, existing sales are forecast to rise 2% and home prices around 3.5%.