The National Association of Realtors Pending Home Sales Index dropped 2.6% to 106.3 in August from 109.1 in July, the group said Wednesday. The index is now at its lowest reading since January 2016 (106.1), is 2.6% below a year ago–and has fallen on an annual basis in four of the past five months.
The PHSI in the Northeast fell 4.4% to 93.4 in August, and is now 4.1% below a year ago. In the Midwest the index decreased 1.5% to 101.8 in August, and is now 3.2% lower than August 2016. Pending home sales in the South retreated 3.5% to an index of 118.8 in August and are now 1.7% below last August. The index in the West declined 1.0% in August to 101.3, and is 2.4% below a year ago.
Lawrence Yun, NAR chief economist, said this summer’s terribly low supply levels have officially drained all of the housing market’s momentum over the past year. “August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,” he said. “Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search.”
With little relief expected from the housing shortages that continue to plague several areas, Yun proclaimed the housing market has “essentially stalled.” Further complicating any sales improvement in the months ahead is Hurricane Harvey’s damage to the Houston region, which contributed to the South’s decline in contract signings in August, and will likely continue to do so in the months ahead. The temporary pause in activity in Florida this month in the wake of Hurricane Irma will slow overall sales even more in the South.
Yun now forecasts existing-home sales to close out the year at around 5.44 million, which comes in slightly below (0.2%) the pace set in 2016 (5.45 million). The national median existing-home price this year is expected to increase around 6%. In 2016, existing sales increased 3.8% and prices rose 5.1%.
“The supply and affordability headwinds would have likely held sales growth just a tad above last year, but coupled with the temporary effects from Hurricanes Harvey and Irma, sales in 2017 now appear will fall slightly below last year,” said Yun. “The good news is that nearly all of the missed closings for the remainder of the year will likely show up in 2018, with existing sales forecast to rise 6.9%.”
