Pending home sales retreated in October, taking a slight step back after two prior months of increases, according to the National Association of Realtors. The Northeast experienced a minor uptick last month, but the other three major U.S. regions reported declines in month-over-month contract activity. However, pending home sales were up nationally and up in all regions compared to a year ago.
The Pending Home Sales Index
The Pending Home Sales Index (PHSI) a forward-looking indicator based on contract signings, fell 1.7% to 106.7 in October. Year-over-year contract signings jumped 4.4%. An index of 100 is equal to the level of contract activity in 2001, according to an NAR news release.
Lawrence Yun, NAR’s chief economist, noted the decline in inventory and a small rise in mortgage rates in October from September too, in part, explain this month’s signings drop.
“While contract signings have decreased, the overall economic landscape remains favorable,” Yun said in the news release. “Mortgage rates continue to be low at below 4% – which will attract buyers – employment levels are strong and many recession claims have dissipated.”
Pointing to data from active listings at realtor.com Yun said the markets where listing prices are around $250,000 – an affordable price point in most markets nationally – are drawing some of the most significant buyer attention, including Fort Wayne, Ind., Pueblo, Colo., Columbus, Ohio, Rochester, N.Y., and Lafayette, Ind.
“We still need to address and, more importantly, correct inadequate levels of inventory across the country,” Yun said in the news release. “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.”
“We risk a lingering shortage of sufficient inventory if homebuilding only continues at its current pace over the next 20 years when the U.S. population is projected to increase by more than 40 million over this period. Clearly, home builders must step in and construct more housing.”
October Pending Home Sales Regional Breakdown
With the exception of the Northeast, all regional indices saw declines in October. The PHSI in the Northeast rose from 1.9% to 95.7 in October, 3.0% higher than a year ago. In the Midwest, the index slid 2.7% to 101.4 last month, 1.8% higher than in October 2018.
Pending home sales in the South decreased by 1.7% to an index of about 125.3 in October, a 5.1% increase from last October. The index in the West declined 3.4% in October 2019 to 91.9, which is an increase of 7.5% from a year ago.