Pending home sales weakened in January as insufficient supply levels of homes for sale continues to press on many markets, particularly in the Midwest and West, the National Association of REALTORS® reported Monday.
NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, dropped 2.8 percent to a reading of 106.4 in January. The latest reading on the index is about 0.4 percent above a year ago, but it’s the lowest reading since that time.
“The significant shortage of listings last month, along with deteriorating affordability as the result of higher home prices and mortgage rates, kept many would-be buyers at bay,” says Lawrence Yun, NAR’s chief economist. “Buyer traffic is easily outpacing seller traffic in several metro areas and is why homes are selling at a much faster rate than a year ago. Most notably in the West, it’s not uncommon to see a home come off the market within a month.”
Yun says that Americans’ interest in purchasing a home is at the highest level since the Great Recession. More households are feeling confident about their financial situation, and job growth is strong. However, despite their optimism, more home shoppers are faced with limited choices due to a shortage of homes for-sale. The limited supply is also driving up prices in many areas.
“January’s accelerated price appreciation is concerning because it’s over double the pace of income growth and mortgage rates are up considerably from six months ago,” says Yun. “Especially in the most expensive markets, prospective buyers will feel this squeeze to their budget and will likely have to come up with additional savings or compromise on home size or location.”
Further, real estate professionals may see their sales more limited over the next few months. Yun says existing-home sales will likely “be choppy in the coming months as buyers compete for the meager number of listings in their price range.”
Source: National Association of REALTORS®
