Pending Home Sales Rose 3.5% in October

Washington, DC, November 29, 2017-The Pending Home Sales Index rose 3.5% to 109.3 in October from a downwardly revised 105.6 in September, according to the National Association of Realtors.

The index is now at its highest reading since June (110.0), but is still 0.6% below a year ago.

Lawrence Yun, NAR chief economist, says pending sales in October were primarily driven higher by a big jump in the South, which saw a nice bounce back after hurricane-related disruptions in September. “Last month's solid increase in contract signings were still not enough to keep activity from declining on an annual basis for the sixth time in seven months,” he said. “Home shoppers had better luck finding a home to buy in October, but slim pickings and consistently fast price gains continue to frustrate and prevent too many would-be buyers from reaching the market.”

According to Yun, the supply and affordability headwinds seen most of the year have not abated this fall. Although homebuilders are doing their best to ramp up production of single-family homes amidst ongoing labor and cost challenges, overall activity still drastically lags demand. Further exacerbating the inventory scarcity is the fact that homeowners are staying in their homes longer. NAR's 2017 Profile of Home Buyers and Sellers-released last month-revealed that homeowners typically stayed in their home for ten years before selling (an all-time survey high). Prior to 2009, sellers consistently lived in their home for a median of six years before selling.

“Existing inventory has decreased every month on an annual basis for 29 consecutive months, and the number of homes for sale at the end of October was the lowest for the month since 1991,” said Yun. “Until new home construction climbs even higher and more investors and homeowners put their home on the market, sales will continue to severely trail underlying demand.”

With two months of data remaining for the year, Yun forecasts for existing-home sales to finish at around 5.52 million, which is an increase of 1.3% from 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 PHSI in the Northeast inched forward 0.5% to 95.0 in October, but is still 1.9% below a year ago. In the Midwest the index increased 2.8% to 105.8 in October, but remains 0.9% lower than October 2016.

Pending home sales in the South jumped 7.4% to an index of 123.6 in October and are now 2.0% higher than last October. The index in the West decreased 0.7% in October to 101.6, and is now 4.4% below a year ago.