September marked two straight months of growth in pending home sales, although contract activity was uneven across the country, the National Association of Realtors (NAR) reported.
The NAR’s Pending Home Sales Index, which tracks pending home sales through contract signings, increased 1.5% to 108.7 in September (the index was benchmarked at a reading of 100 in 2001). Year-over-year, contract signings wereup 3.9%, thanks to mortgage rates lingering near historical lows.
“Even though home prices are rising faster than income, national buying power has increased by 6% because of better interest rates,” said Lawrence Yun, NAR’s chief economist. “Furthermore, we’ve seen increased foot traffic as more buyers are evidently eagerly searching to become homeowners.”
The upper tiers of the housing market are faring well, Yun said, even though growth in contract activity — especially for entry-level homes — would be even higher if there was more supply to go around.
“Going forward, interest rates will surely not decline in a sizable way, so the changes in the median price will be the key to housing affordability,” Yun said. “But home prices are rising too fast because of insufficient inventory. In addition to boosting traditional homebuilding, we should explore a greater utilization of modular factory-constructed homes, converting old shopping malls or vacant office space into condominiums, permitting more accessory dwelling units, and other supply-increasing actions, in order to meet the rising demand for new housing.”
September’s regional breakdown was mixed, with the Midwest and South seeing month-over-month increases in contract activity, but the Northeast and West regressed.
Pending home sales in the South were up 3.6% to a reading of 127.5 in September, a gain of 5.7 percentage points from the same month last year. In the Midwest, the index rose to 104.4, up 3.1 percentage points monthly and 2.7 percentage points annually.
The Northeast index fell monthly by 0.4 percentage points to 93.9, while the West index dropped by 1.3 percentage points to 95.1. Both regions, however, are still up year over year by 2.7 and 3.4 percentage points, respectively.