The National Association of Realtors (NAR) seasonally adjusted pending home sales index declined. Our analysis agrees as the rolling averages declined. The quote of the day from this NAR release:
… 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 ..
Analyst Opinion of Pending Home Sales
The unadjusted data shows the rate of year-over-year growth improved this month – but the more important rolling averages declined. Because there is so much noise in the monthly numbers – the rolling averages are the best way to view the data.
I continue to see few signs that the residential sales market is improving.
Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing).
The NAR reported:
- Pending home sales index was down 2.8 % month-over-month and up 0.4 % year-over-year.
- The market was expecting month-over-month growth of 0.3 % to 1.2 % (consensus +1.1 %) versus the decline of 2.8 % reported.
Econintersect‘s evaluation using unadjusted data:
- the index growth rate accelerated 4.7 % month-over-month and up 2.7 % year-over-year.
- The current trends (using 3 month rolling averages) are decelerating..
- Extrapolating the pending home sales unadjusted data to project January 2017 existing home sales would be a 2.0 % contraction year-over-year for existing home sales.
From Lawrence Yun , NAR chief economist:
…. 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,” he said. “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.
According to Yun, interest in buying a home is the highest it has been since the Great Recession. Households are feeling more confident about their financial situation, job growth is strong in most of the country and the stock market has seen record gains in recent months. While these factors bode favorably for increased sales in coming months, buyers are dealing with challenging supply shortages that continue to run 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. 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.
