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Decline in Home Sales Not Yet Concerning; More Homes Need to Be Built – NAR

by devteam August 28th, 2013 | Share

The National Association of Realtors® (NAR)rnblamed higher interest rates for the slipping home sales numbers reflected in itsrnpending home sales report.   The Pending Home Sales Index (PHSI) figuresrnreleased today were down 1.3 percent from 110.9 in June to 109.5 in July.  The PHSI is a forward looking indicator basedrnon contract signings.  Completedrntransactions are generally expected to follow within 60 days. </p

While recent contract signings are down,rnthe July PHSI is still 6.7 percent higher than its level in July 2012, 102.6.  The index has remained above year-ago levels forrnthe past 27 months.</p

LawrencernYun, NAR chiefrneconomist, noted the uneven pattern of the index in the various geographicrnregions.  “The modest decline in sales isrnnot yet concerning, and contract activity remains elevated, with the South andrnMidwest showing no measurable slowdown.  However, higher mortgage interestrnrates and rising home prices are impacting monthly contract activity in thernhigh-cost regions of the Northeast and the West,” he said.  “More homesrnclearly need to be built in the West to relieve price pressure, or the regionrncould soon face pronounced affordability problems.”</p

The PHSI inrnthe Northeast fell 6.5 percent to 81.5 in July but is 3.3 percent higher than arnyear ago.  In the Midwest the index slipped 1.0 percent to 113.2,rnremaining 14.5 percent above year-earlier figures. Pending home sales in thernSouth rose 2.6 percent to an index of 121.5 in July, 7.7 percent higher than arnyear ago.  The index in the West fell 4.9 percent in July to 108.6, and isrn0.4 percent below July 2012.</p

NAR expectsrnexisting home sales to increase 10 percent this year to about 5.1 million unitsrnand rise to approximately 5.2 million sales next year.  Due to inventory shortages prices arernexpected to grow nearly 11 percent from 2012 to 2013 and then moderate to a 5rnto 6 percent increase in 2014 as increasing construction of new homes takesrnsome pressure off of prices. </p

The PHSI is based on a large national sample, typically representing about 20 percentrnof transactions for existing-home sales. rnThe index base of 100 is equal to the average level of contract activity during 2001, which wasrnthe first year to be examined and, by coincidence a year which fell within thernnormal range of home sales – 5.0 to 5.5 million.

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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