The National Association of Realtors (NAR) seasonally adjusted pending home sales index improved. Our analysis is the opposite. The quote of the day from this NAR release:
… the home search for many prospective buyers being highly competitive and drawn out because of a shortage of listings at affordable prices …
Analyst Opinion of Pending Home Sales
The unadjusted data shows the rate of year-over-year growth slowed this month. Even though I view the minutiae of the data differently, I agree with the NAR’s bottom line. There is not enough inventory – and this is slowing sales volumes all whilst creating a price bubble. We continue to project growth in existing home sales, just not big year-over-year growth that were seen earlier last year.
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 up 1.5 % month-over-month and up 2.4 % year-over-year.
- The market was expecting month-over-month growth of 0.5 % to 2.5 % (consensus +1.0 %) versus the growth of +1.5 % reported.
Econintersect‘s evaluation using unadjusted data:
- the index growth rate was down 1.9 % month-over-month and up 2.0 % year-over-year.
- The current trends (using 3 month rolling averages) are slightly accelerating.
- Extrapolating the pending home sales unadjusted data to project October 2016 existing home sales would be a 1.5% growth year-over-year for existing home sales.
Unadjusted 3 Month Rolling Average of Year-over-Year Growth for Pending Home Sales (blue line) and Existing Home Sales (red line)
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From Lawrence Yun , NAR chief economist:
…. a robust increase in the West and a healthy bump in the South pushed pending sales upward in September. Buyer demand is holding up impressively well this fall with Realtors® reporting much stronger foot traffic compared to a year ago. Although depressed inventory levels are keeping home prices elevated in most of the country, steady job gains and growing evidence that wages are finally starting to tick up are encouraging more households to consider buying a home.
The one major predicament in the housing market is without a doubt the painfully low levels of housing inventory in much of the country. It’s leading to home prices outpacing wages, properties selling a lot quicker than a year ago and the home search for many prospective buyers being highly competitive and drawn out because of a shortage of listings at affordable prices.
