October Pending Home Sales Presage Coming Declines in Sales, Prices
The National Association of Realtors (NAR) Thursday morning released its data on pending sales of existing homes for October. The pending home sales index tumbled by 2.6% from an upwardly revised September reading of 104.8 to an October reading of 102.1. The October index continues to lag year over year and is now down 6.7% compared with October 2017, the 10th straight month of annual decreases.
Existing-home sales closed 2017 at around 5.51 million. NAR chief economist Lawrence Yun said he now forecasts existing-home sales to decline by 3.1% in 2018 to 5.34 million. That’s a further decline from last month’s estimate for a dip of 1.6% to 5.46 million sales.
The national median existing-home price is expected to rise by around 4.7% this year. For 2019, Yun is now forecasting existing-home sales to fall by 0.4% and home price appreciation to drop to around 2.5%.
In 2017 prices rose 5.7% and sales of existing homes increased by 1.1%. In 2016, sales of existing homes increased by 3.8% and prices rose 5.1%.
The consensus estimate called for pending sales to be flat month over month. 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 48 straight months.
The Yun noted:
The recent rise in mortgage rates has reduced the pool of eligible homebuyers. However, mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent. So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty.
Yun also suggested that the Federal Reserve could be “less aggressive” in raising interest rates:
The inflationary pressure is all but disappearing. Given that condition, there is less of a need to aggressively raise interest rates. Looking at the broader economy and keeping in mind that the housing sector is a great contributor to the economy, it would be wise for the Federal Reserve to slow the raising of rates to see how inflation develops.
The October pending-sales index declined in three of four NAR geographical regions. Pending home sales rose to an index score of 92.9 in the Northeast, up by 0.7 points compared with September and down 2.9% year over year. In the West, sales plunged by 8.9 points to an index score of 84.8, down 15.3% compared to last year’s index.
Sales dipped 1.8 points in the Midwest to an index score of 100.4 and are down 4.9% year over year for the month. Sales in the South decreased by 1.1 points to 118.9 in October and are now down 4.6% compared with the year-ago index score.