Pending Home Sales Index Pulls Back Reaches Second-Lowest Level of 2015
The National Association of Realtors' gauge of pending home sales dipped in September, but still managed to record a 3 percent increase compared to the same month in 2014. The NAR also said the index has realized gains on a year-to-year basis for 13 months in a row.
The Pending Home Sales Index of the National Association of Realtors dropped for the second straight month, shedding 2.3 percent in September.
September's PHSI pulled back to 106.8 from 109.3 in August. This is the second-lowest reading of 2015, as the PHSI was at 103.7 in January.
There are some bright spots, however. The index is still 3 percent above the September 2014 PHSI, which stood at 103.7. And September's reading means the PHSI has increased on a year-to-year basis for 13 consecutive months, the NAR said.
Each PHSI is based on pending sales of existing homes. A sale is listed as pending when a contract has been signed but the transaction has not closed. The index's benchmark is 100, which equals the average level of contract activity during 2001, the year the PHSI started.
Lawence Yun, chief economist for the NAR, offered several reasons for the pullback.
"There continues to be a dearth of available listings in the lower end of the market for first-time buyers, and Realtors in many areas are reporting stronger competition than what's normal this time of year because of stubbornly-low inventory conditions," he said. "Additionally, the rockiness in the financial markets at the end of the summer and signs of a slowing U.S. economy may be causing some prospective buyers to take a wait-and-see approach."
All four major U.S. regions saw their respective PHSI readings decrease:
o Midwest - a 2.5 percent drop to 104.7 for the month. It is 4.3 percent above the level of a year ago.
o Northeast - a 4 percent pullback to 89.6 in September. This region is 3.9 percent higher an annual basis.
o South - a 2.6 percent cut to 118.3 for the month. It has decreased 0.1 percent year-to-year.
o West - a 0.2 percent decrease to 104.4 in September. But this region is 6.6 percent higher compared to the same month in 2014.
The NAR still believes the housing market will do well in what is left of 2015.
"With interest rates hovering around 4 percent, rents rising at a near 8-year high, and job growth holding strong -- albeit at a more modest pace than earlier this year -- the overall demand for buying should stay at a healthy level despite some weakness in the overall economy," Yun said.
Third-Quarter Home Ownership Rate Rises
Two key points emerged from the U.S. Census Bureau's third-quarter home ownership report, the National Association of Realtors said.
First, home ownership increased from July to September, after seven quarterly declines. But the hike was only modest, rising to 63.7 from 63.4 percent in the second quarter. Also, it is still well below the record high of 69.2 percent in the second quarter of 2004.
Second, the biggest gain was in the 35-year-old and under age group. This demographic population, called the millennial generation, has traditionally been slow to enter the home ownership realm.
"But that may be starting to change, as the home ownership rate for those under age 35 increased from 34.8 percent to 35.8 percent in the third quarter," the NAR said. "Also, it was the only age group that posted a significant increase in the home ownership rate in the third quarter."