Many industry insiders expected 2017 to be a record-setting year for the national real estate market, but pending home sales data released by the National Association of Realtors shows that the housing market is moving slower than they thought.
U.S. Pending home sales dropped by 2.6 percent — and it’s the fifth time in six months that the number of pending home sales has decreased.
In August 2017, the Pending Home Sales Index was 106.3 — down from 109.1 in July. In fact, the index is at the lowest it’s been since January 2016, when the index was 106.1.
The August 2017 index also represents a 2.6 percent decrease from August 2016.
The latest pending home sales report for August 2017 measures the amount of contract activity in the current United States housing market. The data collected is based on the contracts that are signed during that particular time period of single-family homes, condominiums and co-operative agreements.
Typically, a contract is signed about 30-60 days prior to closing on the home, so the pending home sales report often provides real estate agents and mortgage brokers with an indication of how existing home sales will go in the coming weeks and months.
Why is the Housing Market Seemingly Stalling Out?
The continued decline of the Pending Home Sales Index is cause for concern for many real estate insiders, who rely on a strong housing market to keep their business and investments moving forward.
So what’s causing the index to continue to dwindle month after month?
- Low inventory levels – While the market appeared to be picking up momentum and was poised to have a spectacular year, the supply levels did not meet the demand of buyers throughout the many of the major markets. The housing supply shortage became a huge issue this summer, particularly in competitive hot-spots like Seattle, which caused prices to escalate quickly on the homes that were available. As the competition increased, many potential buyers became too intimidated to get into the market.
- Major weather events – Complicating the situation further, two major hurricanes made landfall near several of the hottest real estate markets in the country. Hurricanes Harvey and Irma wreaked havoc on Texas and Florida, respectively, and stalled a lot of real estate activity in those states during the month of August. The full impact of these natural disasters on the national real estate market has not yet been revealed.
U.S. Regional Pending Home Sales Index Trends
Nationwide, many markets are facing inventory shortages and a decrease in the number of pending home sales each month. However, each region of the country often experiences different housing trends based on economic, social, and natural factors.
Currently, the regional breakdown looks like this:
- Northeast — Pending home sales dropped by 4.4 percent in August 2017. The current Pending Home Sales Index is 93.4 in this region.
- Midwest — Pending home sales dropped by 1.5 percent in August 2017. The current Pending Home Sales Index is 101.8 in this region.
- West — Pending home sales dropped by 1 percent in August 2017. The current Pending Home Sales Index is 101.3 in this region.
- South — Pending home sales dropped by 3.5 percent in August 2017. The current Pending Home Sales Index is 118.8 in this region.
Ultimately, the National Association of Realtors predicts that 2017 will not meet the expectations of investors who were anticipating a hot year in the market.
NAR has downgraded the forecast for total home sales this year, and they predict that the market will continue to slow down in the months ahead.
Pending Home Sales for September 2017 is currently scheduled to be released on Thursday, October 26, 2017 at 10:00 a.m. Eastern.