Pending home sales moved up slightly in October month-over-month, enough to inch sales contracts up to the highest level since July, according to the latest reading from the National Association of REALTORS®’ Pending Home Sales Index, a forward-looking indicator based on contract signings.
Nationwide, pending home sales managed a 0.1 percent month-over-month increase in October to a 110 reading on NAR’s index. The index is now 1.8 percent higher than a year ago.
“Most of the country last month saw at least a small increase in contract signings and more notably, activity in all four major regions is up from a year ago,” says Lawrence Yun, NAR’s chief economist. “Despite limited listings and steadfast price growth that’s now carried into the fall, buyer demand has remained strong because of the consistently reliable job creation in a majority of metro areas.”
Housing supply remains a major hurdle for the market, and the latest seasonal retreat in listings – while expected – could make it an even bigger issue for potential buyers, Yun says. Home price growth remains around triple the pace of wages, and properties are selling at a much faster pace than a year ago, he adds. Forty percent of sales in October sold at or above the list price, up from 33 percent a year ago.
“Many of the successful shoppers in October likely had to move fast and outbid others for the few listings available in the affordable price range,” says Yun. “Those obtaining a mortgage last month were likely the last group of buyers to lock in a rate near historically low levels now that rates have marched to around 4 percent since the election.”
Yun expects existing sales to close out the year at a pace of around 5.36 million. That would surpass 2015’s sales numbers, which were 5.25 million. It also would mean 2016 clocks in with the highest amount of existing-home sales since 2006’s 6.48 million.
“Low supply has kept prices elevated all year and has put pressure on the budgets of buyers,” Yun says. “With mortgage rates expected to rise into next year and put added strain on affordability, sales expansion will be contingent on more inventory coming onto the market and continued job gains.”