US home sales flat and showing annual declines

Pending home sales in the US were flat in September, but activity declined on an annual basis both nationally and in all major regions, according to the National Association of Realtors (NAR).

Its Pending Home Sales Index, a forward-looking indicator based on contract signings, was at 106.0 in September (unchanged from a downwardly revised August figure).

The index is now at its lowest reading since January 2015 (104.7), is 3.5% below a year ago, and has fallen on an annual basis in five of the past six months.

The figures were as widely expected.

Demand exceeds supply

Lawrence Yun, NAR chief economist, said: “Demand exceeds supply in most markets, which is keeping price growth high and essentially eliminating any savings buyers would realise from the decline in mortgage rates from earlier this year.

“While most of the country, except for the South, did see minor gains in contract signings last month, activity is falling further behind last year's pace because new listings aren't keeping up with what's being sold.”

Lawrence Yun, NAR chief economist

Yun said hurricane Irma's direct hit on Florida weighed on activity in the South. He expected a fast bounceback. He said ongoing supply constraints continued to squeeze prospective buyers the most at the lower end of the market. Last month, first-time buyers were 29% of all transactions, which matched the lowest share in two years.

There were better performance in higher priced homes.

“Buyers looking for a little relief from the stiff competition from over the summer may unfortunately be out of luck in the coming months,” said Yun. “Inventory starts to decline heading into the winter, and many would-be buyers from earlier in the year are still on the hunt to find a home.”

The Pending home sales index:

• in the Northeast it rose 1.2% to 94.5 in September, but was still 2.4% below a year ago.
• in the Midwest the index climbed 1.4% to 102.9 in September, but remained 2.5% lower than September 2016.
• in the South it decreased 2.3% to 115.9 in September and is now 5% below last September.
• in the West grew 1.9% in September to 102.7, but is 2.9% below a year ago.