Number of Homes Under Contract Expected to Level Out

Pending-home sales slid in October 2013 and will likely continue to fall as we head into 2014.

Although conditions were mixed across the country, pending-home sales fell in October 2013 for a fifth consecutive month, according to the NATIONAL ASSOCIATION OF REALTORS®.

NAR’s Pending-Home Sales Index slipped 0.6% in October and was 1.6% below October 2012. The Pending-Home Sales Index measures the number of homes that are under contract to sell, where the deal hasn’t yet reached the closing table.

NAR chief economist Lawrence Yun said he expected to see weaker sales activity last month. “The government shutdown in the first half of last month sidelined some potential buyers. In a survey, 17% of REALTORS® reported delays in October, mostly from waiting for Internal Revenue Service income verification for mortgage approval,” he said.

“We could rebound a bit from this level, 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,” Yun said.

Regional Pending-Home Sales

Modest gains in pending-home sales in the Northeast and Midwest offset declines in the South and West. Yun notes there was a greater impact in the high-cost region of the West, where tight inventory also is holding back contract offers. He expects generally flat home sales going into 2014, but continued growth in home prices from limited inventory conditions.

The regional results were:

  • Northeast: Up 2.8% in October, 8.1% above a year ago.
  • Midwest: Up 1.2% in October, 3.2% above a year ago.
  • South: Down 0.8% in October, 1.5% below a year ago.
  • West: Down 4.1% in October, 12.1% below a year ago.

Home Sales in 2014

There are concerns about home sales issues heading into 2014. “New mortgage rules in January could delay the [loan] approval process, and another government shutdown would harm both housing and the economy,” Yun said.

NAR’s also projecting:

  • Annual existing-home sales: 10% higher in 2013 than 2012.
  • National median existing-home price: 11% higher for 2013 and 5.5% higher in 2014.