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Pending Homes Show First Annual Decline in Over 2 Years

by devteam October 28th, 2013 | Share

Contracts for home purchases declinedrnfor the fourth consecutive month the National Association of Realtors® (NAR)rnsaid today.  NAR’s Pending Home SalesrnIndex fell 5.6 percent to 101.6 in September compared to August and is 1.2rnpercent below its value of 102.8 in September 2012.  This is the lowest the index has slippedrnsince last December.  NAR also revisedrnthe August number down slightly from the original report of 107.7 to 107.6.  </p

The Pending Home Sales Index is arnforward looking indicator based on contract signings.  These contracts are generally expected tornresult in closed sales over the following two months.</p

Higher mortgage interest rates as wellrnas higher home prices are curbing buying power, and NAR chief economist Lawrence Yun saidrnconcerns over the government shutdown also played a role in the downturn.  “Declining housing affordability conditionsrnare likely responsible for the bulk of reduced contract activity,” he said. “Inrnaddition, government and contract workers were on the sidelines with growingrninsecurity over lawmakers’ inability to agree on a budget. A broader hit onrnconsumer confidence from general uncertainty also curbs major expenditures suchrnas home purchases.”</p

This, Yun said,rnwas the first time in 29 months that pending home sales weren’t above levelsrnthe previous year. “This tells us to expect lower home sales for the fourthrnquarter, with a flat trend going into 2014. Even so, ongoing inventoryrnshortages will continue to lift home prices, though at a slower single-digit growthrnrate next year.”</p

The index wasrndown on a month-over month basis in all four regions and below levels of a yearrnearlier in two.  The Northeast dropped torn76.7 in September, 9.6 percent below August and 6.4 percent below a year ago. Inrnthe Midwest the index fell to 102.3, down 8.3 percent for the month but up 5.7rnpercent from September 2012.  Pendingrnhome sales in the South slipped 0.4 percent to an index of 116.2 in September, 2.0rnpercent above a year ago. The index in the West dropped to 97.3, down 9.0rnpercent and 9.8 percent from the two earlier periods </p

NAR projectsrnthe nation will finish the year with total existing-home sales of more than 5.1rnmillion, up 10 percent from 2012, and are likely to hold even in 2014. Thernnational median existing-home price is expected to rise 11 to 11.5 percent forrnall of 2013, but moderate to a 5 to 6 percent gain in 2014. </p

The PendingrnHome Sales Index is based on a large national sample, typically representingrnabout 20 percent of transactions for existing-home sales. An index of 100 isrnequal to the average level of contract activity during 2001, which was thernfirst year to be examined.

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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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