Are Higher Home Prices Spooking Buyers?
Contracts to buy homes dropped nationwide in August, as home prices continued to inch upward, the National Association of REALTORS® reports. Modest increases in pending home sales in the West were offset by declines in all other regions last month.
Pending Home Sales By Region
- Northeast: pending home sales dropped 5.6 percent to 93.3 last month, but remain 8.9 percent above a year ago.
- Midwest: pending home sales were down 0.4 percent to 107.4 in August, but are 6.5 percent above August 2014 levels.
- South: pending home sales dropped 2.2 percent to an index reading of 121.5, but are 4.1 percent above year ago levels.
- West: pending home sales increased 1.8 percent in August to 104.9, and are 7.6 percent above a year ago.
NAR’s Pending Home Sales Index – a forward-looking indicator based on contract signings – retreated 1.4 percent in August to a 109.4 reading. Despite the drop, pending home sales remain 6.1 percent above August 2014 levels.
Buyer demand is continuing to outpace the housing supply and it’s also prompting home prices to increase in many markets across the country, says Lawrence Yun, NAR’s chief economist.
“Pending sales have leveled off since mid-summer, with buyers being bounded by rising prices and few available and affordable properties within their budget,” Yun says. “Even with existing-housing supply barely budging all summer and no relief coming from new construction, contract activity is still higher than earlier this year and a year ago.”
Yun predicts that sales will maintain their current pace in the months ahead. But, he cautions, there are several headwinds that could impact housing.
“The possibility of a government shutdown and any ongoing instability in the equity markets could cause some households to put off buying for the time being,” Yun says. “Furthermore, adapting to the changes being implemented next month in the mortgage closing process could delay some sales.”
Still, NAR says the national median existing-home price will likely rise 5.8 percent this year, reaching $220,300. Also, existing-home sales likely will rise 7 percent to around 5.28 million – 25 percent below the prior peak set in 2005.
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