Pending Home Sales Unexpectedly Drop in September

The National Association of Realtors said Thursday that their Pending Home Sales Index contracts to buy previously-owned homes dropped 2.3% in September. The survey results represent an unexpected drop and missed forecasts for a 1% rise.

“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,” said Lawrence Yun, chief economist for the NAR. “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.”

Pending home contracts become sales after a month or two, and last month’s decrease suggests a softening in home sales after more robust levels earlier this year.  While contracts fell in all four major U.S. regions in September, with the Northeast recording the biggest drop at 4.0%, contracts in all regions still remain above their levels from a year ago.

“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.”

In the Midwest the index declined 2.5% to 104.7 in September, but remains 4.3% above September 2014. Pending home sales in the South decreased 2.6% to an index of 118.3 in September and are now 0.1% below last September, while the index in the West inched back 0.2% in September to 104.4, though is still 6.6% above a year ago.