Pending Home Sales Constrained by Inventory, Higher Prices

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New homeThe National Association of Realtors (NAR) this morning released its data on pending sales of existing homes in August. The pending home sales index fell 1.6% from a downwardly revised index reading of 109.4 in July to the August reading of 107.7. That is 5.8% higher than in August 2012, when the index reading was 101.8. The consensus estimate called for a month-over-month decrease of 1% in pending sales. The index reflects signed contracts, not sales closings. An index reading of 100 equals the average level of contract signings during 2001.

The May 2013 index reading of 111.3 was the highest reading in more than six years, since an index score of 112.8 in December of 2006.

Total existing home sales are expected to rise about 11% year-over-year in 2013, up from last month's projection for an increase of 10%. National median home prices are forecast to rise by 11% to 12% this year, primarily due to the inventory shortage of existing homes for sale. The median price forecast is slightly higher than last month's forecast. Price gains for 2014 are now estimated to rise about 5% to 6%.

The NAR's chief economist noted:

Sharply rising mortgage interest rates in the spring motived buyers to make purchase decisions, culminating in a six-and-a-half-year peak for sales that were finalized last month. Moving forward, we expect lower levels of existing-home sales, but tight inventory in many markets will continue to push up home prices in the months ahead.

Pending home sales in the Northeast U.S. rose 4% in August, posting an index reading of 84.8, up 5.1% from August 2012. The index slipped 1.4% in the Midwest and fell 3.5% in the South. The index declined by 1.6% in the West.

Filed under: Housing
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