Inventories Pulling Home Sales and Prices in Opposite Directions

Pendingrnhome sales fell in October to the lowest level in nearly a year.  The Pending Home Sales Index (PHSI) releasedrnthis morning by the National Association of Realtors® (NAR) slipped 0.6 percentrnto 102.1 in October from a revised estimate of 102.7 in September.  It was down 1.6 percent from the October 2012rnof 103.8.   October was the fifth consecutive monthlyrndecline for the index and its lowest level since December 2012.</p

NAR’srnPHSI is a forward looking measure of contracts signed for home purchases. Therncontracts are expected to become closed sales, usually within two months ofrncontract signing.</p

Conditionsrnwere mixed across the country and Lawrence Yun, NAR’s Chief Economist, saidrnactivity was not as weak as had been expected. rnIn a survey,rn17 percent of Realtors reported delays in October, mostly fromrnwaiting for IRS income verification for mortgage approvals during therngovernment shutdown.  “We could rebound arnbit from this level,” he said, “but still face the headwinds of limitedrninventory and falling affordability conditions. Job creation and a slightrndialing down from current stringent mortgage underwriting standards going intorn2014 can help offset the headwind factors.” </p

Modest gainsrnin the Northeast where the PHSI was 85.8, up 2.8 percent in October and 8.1rnpercent from a year ago and in the Midwest where the index rose 1.2rnmonth-over-month and 3.2 percent on an annual basis to 104.1 were offset byrndeclines in the South and West. Pending home sales in the South slipped 0.8rnpercent to an index of 114.5 in October, and were 1.5 percent below a year ago.rnThe index in the West fell 4.1 percent in October to 93.3, and were 12.1rnpercent lower than October 2012.  Yunrnnotes there was a greater impact in the high-cost regions of the West, whererntight inventory also is holding back contract offers. </p

NAR isrnforecasting an increase of 10 percent in home sales in 2013 compared to 2012,rntotaling just about 5.1 million units but then little change as sales flattenrngoing into 2014.  There will be continuedrngrowth in home prices because of limited inventories.  The national median existing-home price forrn2013 is projected to be 11 percent above last year, and then cool to a 5.0 torn5.5 percent increase in 2014.</p

Yun however expressedrnconcerns as the country heads into 2014. “New mortgage rules in January couldrndelay the approval process, and another government shutdown would harm bothrnhousing and the economy,” he said.

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