Pending home sales declined for the fourth consecutive month in September, as higher mortgage interest rates and higher home prices curbed buying power, according to the National Association of Realtors (NAR). The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, fell 5.6 percent to 101.6 in September from a downwardly revised 107.6 in August, and is 1.2 percent below September 2012 when it was 102.8. The index is at the lowest level since December 2012 when it was 101.3; the data reflect contracts but not closings.
“Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity,” said Lawrence Yun, NAR chief economist. “In addition, government and contract workers were on the sidelines with growing insecurity over lawmakers’ inability to agree on a budget. A broader hit on consumer confidence from general uncertainty also curbs major expenditures such as home purchases.”
Yun notes this is the first time in 29 months that pending home sales weren’t above year-ago levels.
“This tells us to expect lower home sales for the fourth quarter, with a flat trend going into 2014," said Yun. "Even so, ongoing inventory shortages will continue to lift home prices, though at a slower single-digit growth rate next year.”
The PHSI in the Northeast dropped 9.6 percent to 76.7 in September, and is 6.4 percent below a year ago. In the Midwest the index fell 8.3 percent to 102.3 in September, but is 5.7 percent higher than September 2012. Pending home sales in the South slipped 0.4 percent to an index of 116.2 in September, but are 2.0 percent above a year ago. The index in the West dropped 9.0 percent in September to 97.3, and is 9.8 percent lower than September 2012.
Total existing-home sales this year will be 10 percent higher than 2012, reaching more than 5.1 million, and are likely to hold even in 2014. The national median existing-home price is expected to rise 11 to 11.5 percent for all of 2013, but moderate to a 5 to 6 percent gain in 2014.