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Investor Pull-Back hits Pending Home Sales

by devteam September 29th, 2014 | Share

Pending home sales declined slightly inrnAugust, mirroring a similar pull-back in existing home sales announced lastrnweek.  The National Association ofrnRealtors® (NAR) said today that its Pending Home Sale Index (PHSI) for Augustrnwas 104.7, a decline of 1.0 percent from July’s level of 105.8.  Existing home sales, also according to NAR,rnslipped 1.8 percent in August.  The monthrnhowever remained the second best of 2014 for both performance measures. </p

The PHSI is a forward-looking indicator based on contract signings for homernpurchases.  Despite the slight decline inrnAugust the index is above 100, considered an average level of contract activityrnfor the fourth consecutive month. The August index was 2.2 percent below the PHSI in August 2013. </p

Likernthe decline in existing home sales, Lawrence Yun, NAR chief economist said therneasing of the PHSI was partially due to investor pull-back from the residentialrnmarket.  “Fewer distressed homes at bargain prices and thernacknowledgement we’re entering a rising interest rate environment likely causedrnhesitation among investors last month,” he said. “With investors pulling back,rnthe market is shifting more towards traditional and first-time buyers who relyrnon mortgages to purchase a home.” </p

According tornNAR’s Profile of Home Buyers and Sellers, 81 percent of first-time buyers inrn2013 who financed their purchase obtained a conventional or FHA loan. Overall,rnfirst-time homebuyers have represented less than a third of all buyers eachrnmonth for the past two years. </p

Yun saysrnfirst-time buyer participation should gradually improve despite tight creditrnconditions and the inevitable rise in rates. “The employment outlook for youngrnadults is brightening and their incomes finally appear to be rising,” he said.rn”Jobs and income gains will help repay student debt and better positionrnfirst-time buyers, setting the stage for improved sales growth in upcomingrnyears.”  </p

All major regions experienced declines in pending salesrnexcept for the West, which rose for the fourth consecutive month, increasing byrn2.6 percent to 102.1, but is still 2.6 percent below the previous August. ThernPHSI in the Northeast slipped 3.0 percent to 86.5 in August, but remains 1.6rnpercent above a year ago. In the Midwest the index fell 2.1 percent to 102.4 inrnAugust, and is 7.6 percent below August 2013.  Pending home sales in thernSouth decreased 1.4 percent to an index of 117.0 in August, unchanged from arnyear ago. </p

Yun forecastsrnexisting-homes sales to be down 3.0 percent this year to 4.94 million, comparedrnto 5.09 million sales of existing homes in 2013.  Home sales are expected to be stronger in thernsecond half of the year behind improved inventory conditions, continuously lowrninterest rates and slower price growth. The national median existing-home pricernis projected to grow between 5 and 6 percent this year and 4 and 5 percent nextrnyear.

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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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