Pending home sales fell in October to the lowest level in nearly a year. The Pending Home Sales Index (PHSI) released this morning by the National Association of Realtors® (NAR) slipped 0.6 percent to 102.1 in October from a revised estimate of 102.7 in September. It was down 1.6 percent from the October 2012 of 103.8. October was the fifth consecutive monthly decline for the index and its lowest level since December 2012.
NAR's PHSI is a forward looking measure of contracts signed for home purchases. The contracts are expected to become closed sales, usually within two months of contract signing.
Conditions were mixed across the country and Lawrence Yun, NAR's Chief Economist, said activity was not as weak as had been expected. In a survey, 17 percent of Realtors reported delays in October, mostly from waiting for IRS income verification for mortgage approvals during the government shutdown. "We could rebound a bit from this level," he said, "but still face the headwinds of limited inventory and falling affordability conditions. Job creation and a slight dialing down from current stringent mortgage underwriting standards going into 2014 can help offset the headwind factors."
Modest gains in the Northeast where the PHSI was 85.8, up 2.8 percent in October and 8.1 percent from a year ago and in the Midwest where the index rose 1.2 month-over-month and 3.2 percent on an annual basis to 104.1 were offset by declines in the South and West. Pending home sales in the South slipped 0.8 percent to an index of 114.5 in October, and were 1.5 percent below a year ago. The index in the West fell 4.1 percent in October to 93.3, and were 12.1 percent lower than October 2012. Yun notes there was a greater impact in the high-cost regions of the West, where tight inventory also is holding back contract offers.
NAR is forecasting an increase of 10 percent in home sales in 2013 compared to 2012, totaling just about 5.1 million units but then little change as sales flatten going into 2014. There will be continued growth in home prices because of limited inventories. The national median existing-home price for 2013 is projected to be 11 percent above last year, and then cool to a 5.0 to 5.5 percent increase in 2014.
Yun however expressed concerns as the country heads into 2014. "New mortgage rules in January could delay the approval process, and another government shutdown would harm both housing and the economy," he said.