WASHINGTON (AP) — Americans signed fewer contracts to purchase homes in October, as would-be buyers struggled to find available properties.
The National Association of Realtors said Wednesday that its pending home sales index, which measures the number of purchase contracts signed, fell 1.7% last month. The signed contracts become final purchases 1-2 months later.
Still, declining mortgage rates over time have lifted home sales. The index is up 4.4% from a year ago.
Mortgage rates have fallen sharply in the past year, partly because the Federal Reserve has lowered its benchmark short-term interest rate. That has partially offset steady increases in average home prices across the nation.
With companies hiring at a solid pace and wages rising modestly, Americans’ finances are generally improving and enabling more people to buy. Sales of existing homes have increased 4.6% in the past year. New home sale have soared by almost a third in the past year.
But Americans who want to buy a home have fewer choices. The number of available houses fell to 1.8 million in October, a record low for that month.
With the exception of the Northeast, all regional indices saw declines in October. The PHSI in the Northeast rose 1.9% to 95.7 in October, 3.0% higher than a year ago. In the Midwest, the index slid 2.7% to 101.4 last month, 1.8% higher than in October 2018.
Pending home sales in the South decreased 1.7% to an index of 125.3 in October, a 5.1% increase from last October. The index in the West declined 3.4% in October 2019 to 91.9, which is an increase of 7.5% from a year ago.
Lawrence Yun, NAR’s chief economist, noted the decline in inventory and a small rise in mortgage rates in October from September to, in part, explain this month’s signings drop. “While contract signings have decreased, the overall economic landscape remains favorable,” Yun said. “Mortgage rates continue to be low at below 4% – which will attract buyers – employment levels are strong and many recession claims have dissipated.”
Pointing to data from active listings at realtor.com, Yun says the markets where listing prices are around $250,000 – an affordable price point in most markets nationally – are drawing some of the most significant buyer attention, including Fort Wayne, Ind., Pueblo, Colo., Columbus, Ohio, Rochester, N.Y., and Lafayette, Ind.
“We still need to address and, more importantly, correct inadequate levels of inventory across the country,” Yun said. “There is no shortage of buyers seeking homes, but a lack of available units continues to drag down the nation’s housing market and overall economy.”
“We risk a lingering shortage of sufficient inventory if homebuilding only continues at its current pace over the next 20 years, when the U.S. population is projected to increase by more than 40 million over this period. Clearly, home builders must step in and construct more housing.” – additional reporting by FWBP Staff