Pending home sales slipped in Septemberby Marcie Geffner
September was a rocky month for housing markets. Not only did closed home sales slip, but pending sales also declined for the fourth consecutive month, according to the National Association of Realtors (NAR).
Pending sales are those for which the buyer and seller have signed a contract, but not yet completed their transaction. Sales usually are finalized a few months after the contract is signed, so pending deals can be a leading indicator of completed sales. Analytic models have shown that pending sales in one month tend to track closed sales two months later.
Higher mortgage rates blamed
In a statement, NAR Chief Economist Lawrence Yun attributed the decline in pending sales in September to higher mortgage rates, higher home prices and the federal government shutdown.
“Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity,” Yun said. “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.”
Pending sales dip
To measure pending home sales, NAR uses an index in which the average level of pending sales activity was pegged at 100 in 2001, the first year of data the index examined. By coincidence, existing-home sales in 2001 were within the 5.0-to-5.5 million range considered normal for the current U.S. population.
In September, the index stood at 101.6, a decline of 5.6 percent compared with the 107.6 level in August and a decline of 1.2 percent compared with the 102.8 level in September 2012. The September 2013 mark was the lowest level of pending sales activity since December 2012, when the index was 101.3, NAR said.
September was the first month in the last 29 months that pending home sales weren’t higher than the year-ago level.
“This tells us to expect lower home sales for the fourth quarter, with a flat trend going into 2014,” Yun said.
Still, he added that constrained supplies of for-sale homes will continue to lift home prices. The national median price of existing detached homes and condominiums sold in September was $199,200, up 11.7 percent compared with September 2012.
Pending sales activity varied in different regions of the country, but no region posted an increase in pending sales contracts in September compared with August.
In the Northeast, the index dropped 9.6 percent to 76.7 in September. In the Midwest, the index fell 8.3 percent to 102.3, but was 5.7 percent higher than September 2012. In the South, the index slipped 0.4 percent in September to 116.2, but was 2 percent higher than the comparable prior-year period. In the West, the index dropped 9 percent in September to 97.3, 9.8 percent lower than September 2012.