WASHINGTON – Nov. 29, 2017 – Pending home sales rebounded strongly in October following three straight months of diminishing activity – but they're still below year-ago levels, according to the National Association of Realtors® (NAR). All major regions except for the West saw an increase in contract signings last month.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 3.5 percent to 109.3 in October from a downwardly revised 105.6 in September. The index is now at its highest reading since June (110.0), but it's still 0.6 percent below a year ago.
A big jump in the South after a nice bounce-back after hurricane-related disruptions largely drove the October pending-sales increase, says Lawrence Yun, NAR chief economist. "Last month's solid increase in contract signings was still not enough to keep activity from declining on an annual basis for the sixth time in seven months," he adds. "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, supply and affordability headwinds have not abated. 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 10 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," says 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 that existing-home sales will finish 2017 at around 5.52 million, an increase of 1.3 percent from 2016 (5.45 million).
The national median existing-home price this year is expected to increase around 6 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.
The PHSI in the Northeast inched forward 0.5 percent to 95.0 in October, but it's still 1.9 percent below a year ago. In the Midwest, the index increased 2.8 percent to 105.8 in October but remains 0.9 percent lower than October 2016.
Pending home sales in the South jumped 7.4 percent to an index of 123.6 in October and are now 2.0 percent higher than last October. The index in the West decreased 0.7 percent in October to 101.6, and is now 4.4 percent below a year ago.
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