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Pending home sales lose steam at year's start

by  | Corporate
Posted:     Updated: Feb 27, 2017  18:25 ET
 
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Economists have been worrying about the low inventories of homes for sale, and rising home prices, but so far that hasn’t translated into lower sales.

In January, both existing-home sales and new-home sales were up solidly over the December level and year over year. Existing-home sales were the strongest in a decade last month.Home sales

On Monday, Feb. 27, however, the National Association of Realtors (NAR) released its pending home-sales reading based on the contract activity in January of this year. That release tends to reveal what the market for existing homes will look like in a couple of months, when the sales close.

It seemed to indicate that buyers are starting to balk at the high home prices, combined with higher mortgage rates and a tight housing stock offering fewer choices.

NAR’s pending-sale index fell 3.1 percentage points, to 106.4, in January, the lowest level for the index since January 2016, NAR reported.

Fewer contract signings likely means that home sales will decline over the next couple of months, NAR Chief Economist Lawrence Yun said.

“The buyers are becoming hesitant,” Yun said. “Perhaps it is due to affordability challenges, higher mortgage rates, higher home prices. There are significant inventory challenges.”

Notably, one region that saw a lull in contract signings was the red-hot West, which includes the states of Washington, Oregon, Idaho, Utah and several high-priced California cities.

In these areas, the economies are strong, but home prices have been rising at three times the rate of wages. Contract activity also is off in the Midwest region.

In the West, the index declined by 9.8 percent in the month and is now 0.4 percent below the level in January 2016. Contract activity in the Midwest fell by 5 percent in the month, and is 3.8 percent below the activity a year earlier.

Contract signings stepped up in the South and the Northeast regions during the month, and pending sales were running ahead of January 2016 by 2 percent in the South and 3.6 percent in the Northeast.

NAR is still predicting that sales of existing homes will end 2017 at around 5.57 million, outpacing the 2016 level of 5.45 million. 2017 should also see the housing market’s expansion begin to cool off, however. The annualized rate of sales will not increase by nearly as much in 2017, according to NAR. Sales increased by 3.8 percent in 2016 from the 2015 level, and that is projected to fall to a 2.2 percent increase in 2017.

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Victor Whitman is chief reporter for Scotsman Guide Media. Reach him at (800) 297-6038 or victorw@scotsmanguidenews.com.

Topics: Residential economy | Residential lending
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Pending home sales lose steam at year's start

by Scotsman Guide Media | Corporate
Posted: Feb 27, 2017  18:23 ET    Updated: Feb 27, 2017  18:25 ET

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