NAR: Pending Home Sales Dipped Slightly In August

Pending home sales fell slightly in August, dipping 1.0% compared to July – however, contract signings remained at their second-highest level in the past year, according to the National Association of Realtors' (NAR) Pending Home Sales Index, a forward-looking indicator based on contract signings.

The news comes after NAR's report last week showing that existing-home sales fell 1.8% in August.

‘Fewer distressed homes at bargain prices and the acknowledgement we're entering a rising interest-rate environment likely caused hesitation among investors last month,’ says Lawrence Yun, chief economist for NAR, in a statement. ‘With investors pulling back, the market is shifting more toward traditional and first-time buyers who rely on mortgages to purchase a home.’

All major regions experienced declines except for the West, which saw pending home sales increase 2.6%. It was the fourth consecutive month that the West saw pending home sale increase. Pending home sales in the South decreased 1.4%.

Despite the decline, contract signings in August were still only about 2.2% below where they were in August 2013, according to the report.

Also helping to drive down pending sales is the fact that first-time home buyers have been essentially priced out of the market. Currently, they represent about 29% of all home sales, whereas traditionally, they represent around 40%.

However, Yun says first-time buyer participation should gradually improve, despite tight credit conditions and the inevitable rise in mortgage interest rates.

‘The employment outlook for young adults is brightening, and their incomes finally appear to be rising,’ he says. ‘Jobs and income gains will help repay student debt and better position first-time buyers, setting the stage for improved sales growth in upcoming years.’Â

NAR forecasts that existing-home sales will be stronger in the second half of the year, due mainly to improved inventory conditions and slower price growth. However, Yun forecasts existing-homes sales will be down 3% this year to 4.94 million, compared to 5.09 million in 2013.

NAR forecasts that existing-home prices will grow between 5% and 6% this year and 4% and 5% next year.


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