August Pending Home Sales Drop as Prices Rise, Inventory Falls

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The National Association of Realtors (NAR) Thursday morning released its data on pending sales of existing homes for August. The pending home sales index fell 2.7 points (down 2.4%) to 108.5 from a downwardly revised July reading of 111.2. The August reading is also down 0.2% year over year.

August sales in three of four NAR regions sent the index tumbling to its second-lowest reading of the year, behind the January index of 105.4.

The consensus estimate called for a month-over-month decrease of 0.5% in pending sales. The index reflects signed contracts, not sales closings. An index reading of 100 equals the average level of contract signings during 2001.

The index has been above 100 (the “average” reading) for 24 straight months.

The NAR’s chief economist noted:

Contract activity slackened throughout the country in August except for in the Northeast, where higher inventory totals are giving home shoppers greater options and better success signing a contract. In most other areas, an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the miniscule number of affordable listings. … There will be an expected seasonal decline in new listings in coming months, which could accelerate price appreciation and make finding an affordable home even more of a struggle for would-be buyers

2016 existing-homes sales are now forecast rise about 2.1% to around 5.36 million, and the highest annual pace since 2006 (6.48 million). In 2015, existing-home sales rose 6.3% and prices rose 6.8%.

By region, August pending home sales increased by 1.3% to an index score of 98.1 in the Northeast, up 5.9% compared with August 2015. In the South, sales slipped 3.2% to an index score of 119.8, 1.5% below last year’s index.

Sales dipped by 5.3% in the West to an index score of 102.8, down 0.6% year over year for the month, and sales in the Midwest declined by 0.9% to an August index score of 104.7, now 1.7% lower than August 2015.