Pending homes sales slip in January on low supply

A shortage of houses for sale dragged down pending home sales in January to their lowest level in a year, according to a new report released on Monday.

The latest pending home sales index, which is a forward-looking indicator based on contract signings, decreased 2.8 percent to 106.4 in January from 109.5 in December, according to the National Association of Realtors.

{mosads}Although last month’s index reading is 0.4 percent above last January, it is the lowest since then.

Lawrence Yun, NAR chief economist, says home buyers faced several obstacles in their quest to buy a home last month.

“The significant shortage of listings last month along with deteriorating affordability as the result of higher home prices and mortgage rates kept many would-be buyers at bay,” Yun said.

“Buyer traffic is easily outpacing seller traffic in several metro areas and is why homes are selling at a much faster rate than a year ago,” he said.

Yun said interest in buying a home is the highest it has been since the Great Recession behind stronger consumer confidence, jobs growth and the stock market’s expansion. 

But buyers still have to deal with short supply and rising home prices.

“January’s accelerated price appreciation is concerning because it’s over double the pace of income growth and mortgage rates are up considerably from six months ago,” Yun said.

“Especially in the most expensive markets, prospective buyers will feel this squeeze to their budget and will likely have to come up with additional savings or compromise on home size or location,” he said.

Existing-home sales are forecast to reach around 5.57 million this year, an increase of 2.2 percent from 2016’s level of 5.45 million.

The median existing-home price this year is expected to increase around 4 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

Regionally, pending sales in the Northeast rose 2.3 percent and sales in the South ticked up  0.4 percent in January.

In the Midwest the index fell 5 percent while sales dropped 9.8 percent in the West.