Pending home sales slowed a bit in August, but contract signings remain at their second-highest level over the past year, data from the NATIONAL ASSOCIATION OF REALTORS® show.
The West was the only region reporting an increase in pending home sales.
NAR’s Pending Home Sales Index (PHSI) fell 1.0% in August and was 2.2% below August 2013. The PHSI counts the number of signed real estate contracts for existing single-family homes, condos, and co-ops.
The modest decline likely occurred because there are fewer distressed homes (short sales and foreclosures) for sale at bargain prices this year. Plus, real estate investors are buying fewer homes, NAR Chief Economist Lawrence Yun says.
“We’re entering a rising interest rate environment, which likely caused hesitation among investors last month,” Yun said. “With investors pulling back, the market is shifting more towards traditional and first-time buyers who rely on mortgages to purchase a home.”
In fact, 81% of first-time buyers in 2013 who financed their purchase obtained a conventional or FHA loan, according to NAR’s “Profile of Homebuyers and Sellers.”
Overall, first-time homebuyers have been less prevalent during the housing recovery, representing less than one-third of all buyers each month for the past two years.
Yun says first-time buyer participation should gradually improve despite tight credit conditions and the inevitable rise in rates. “The employment outlook for young adults is brightening and their incomes finally appear to be rising,” he said. “Jobs and income gains will help repay student debt and better position first-time buyers, setting the stage for improved sales growth in upcoming years.”
Pending Home Sales by Region
|August 2014||Vs. August 2013|
|National||Down 1.0%||Down 2.2%|
|Northeast||Down 3.0%||Up 1.6%|
|Midwest||Down 2.1%||Down 7.6%|
|West||Up 2.6%||Down 2.6%|
Yun predicts existing-home sales will be stronger in the second half of the year behind improved inventory conditions, continuously low interest rates, and slower price growth. By year-end, he says 4.94 million homes will have changed hands, compared with 5.09 million sales of existing homes in 2013.
The national median existing-home price will grow between 5% and 6% this year and 4% and 5% next year, Yun predicts.