Photographer: Ron Antonelli/Bloomberg

Pending Home Sales in U.S. Decline by Most Since January

Contract signings for the purchase of previously owned U.S. homes fell in August by the most in seven months, reflecting limited inventory, the National Association of Realtors said Wednesday. The Realtors group’s revised forecast for the year calls for sales to weaken from 2016 in the wake of two hurricanes.

Highlights of Pending Home Sales (August)

  • Index dropped 2.6% (est. 0.5% decline) after a 0.8% decline
  • Gauge fell 3.1% from August 2016 on unadjusted basis
  • Contract signings in the South were affected by Harvey, NAR says

Key Takeaways

A limited number of properties for sale fueled declines in contract signings for the fifth time in six months, a trend that will be made worse in the aftermath of hurricanes Harvey and Irma, the Realtors group said. Lean inventory is keeping prices climbing more than wages, creating a more challenging purchasing climate for first-time homebuyers.

The Realtors group projects 5.44 million homes will be sold this year, down from last month’s estimate of 5.49 million and lower than the 5.45 million sold in 2016. The NAR sees the median selling price increasing 6 percent this year, compared with the 5.1 percent gain in 2016.

Economist’s View

“August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,” Lawrence Yun, NAR’s chief economist, said in a statement. “Further complicating any sales improvement in the months ahead is the fact that Hurricane Harvey’s damage to the Houston region contributed to the South’s decline in contract signings in August, and will likely continue to do so in the months ahead.”

Other Details

  • Purchase contracts dropped 3.5 percent in the South, the nation’s largest region, from a month earlier and were down 4.4 percent in the Northeast
  • Signings declined 1.5 percent in the Midwest month over month and 1 percent in the West
  • All regions are now showing declines in year-over-year pending sales
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