The National Association of Realtors (NAR) seasonally adjusted pending home sales index rose strongly following three straight months of diminishing activity, but continued to fall behind year ago levels. The quote of the day from this NAR release:
… Until new home construction climbs even higher and more investors and homeowners put their home on the market, sales will continue to severely trail underlying demand. …
Analyst Opinion of Pending Home Sales
The rolling averages are in negative territory. The data is very noisy and must be averaged to make sense of the situation. There is no signs of a surge in home sales, although the trends are now upward.
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 rose 3.5 % month-over-month and down 0.6 % year-over-year.
- The market [from Bloomberg / Econoday} was expecting month-over-month growth of 0.6 % to 2.0 % (consensus +1.0 %) versus the 3.5 % reported.
Econintersect‘s evaluation using unadjusted data:
- the index growth rate was up 6.9 % month-over-month and up 1.2 % year-over-year.
- The current trend (using 3 month rolling averages) is improving but in contraction.
- Extrapolating the pending home sales unadjusted data to project November 2017 existing home sales would be down 8.7 % year-over-year for existing home sales.
From Lawrence Yun, NAR chief economist:
…. pending sales in October were primarily driven higher by a big jump in the South, which saw a nice bounce back after hurricane-related disruptions in September. Last month’s solid increase in contract signings were still not enough to keep activity from declining on an annual basis for the sixth time in seven month. Home shoppers had better luck finding a home to buy in October, but slim pickings and consistently fast price gains continue to frustrate and prevent too many would-be buyers from reaching the market.
The supply and affordability headwinds seen most of the year have not abated this fall. Although homebuilders are doing their best to ramp up production of single-family homes amidst ongoing labor and cost challenges, overall activity still drastically lags demand. Further exacerbating the inventory scarcity is the fact that homeowners are staying in their homes longer. NAR’s 2017 Profile of Home Buyers and Sellers - released last month- revealed that homeowners typically stayed in their home for 10 years before selling (an all-time survey high). Prior to 2009, sellers consistently lived in their home for a median of six years before selling.
Existing inventory has decreased every month on an annual basis for 29 consecutive months, and the number of homes for sale at the end of October was the lowest for the month since 1991. Until new home construction climbs even higher and more investors and homeowners put their home on the market, sales will continue to severely trail underlying demand.
