It’s a jungle out there for home buyers
Pending home sales remained unchanged in September from the downwardly revised reading of 106 in August, on the National Association of Realtors’ Pending Home Sales Index.
Pending home sales: Was it Irma’s fault?
The index measures future market activity based on contract signings. September’s reading is the lowest since January 2015 at 104.7. It’s also 3.5 percent lower than September 2016’s level.
A lack of affordable inventory and rising prices keep putting buyers’ plans on ice, says Lawrence Yun, NAR’s chief economist. As a result, pending home sales aren’t likely to see much of an improvement for the remainder of the year.
“Demand exceeds supply in most markets, which is keeping price growth high and essentially eliminating any savings buyers would realize from the decline in mortgage rates from earlier this year,” Yun said in a news release.
Also to blame: the recent hurricanes that battered Texas and Florida.
“Hurricane Irma’s direct hit on Florida weighed on activity in the South, but similar to how Houston has rebounded after Hurricane Harvey, Florida’s strong job and population growth should guide sales back to their pre-storm pace fairly quickly,” Yun says.
First-timer buyers flee pending home sales
In September, first-time buyers comprised 29 percent of all transactions, matching the lowest share in two years, NAR reported.
It’s also worth noting that existing sales were down considerably on an annual basis for properties priced below $250,000. On the other hand, higher-price homes are seeing solid sales up the price-point ladder, Yun says.
But winter is coming, and that’s when pending home sales really slow down.
“Inventory starts to decline heading into the winter, and many would-be buyers from earlier in the year are still on the hunt to find a home,” Yun says.
It’s true that your chances of finding a home dwindle as the mercury drops, but it’s worth keeping the search up in case motivated sellers put their homes on the market.
You might not find rock-bottom prices in the winter, but sellers might be more willing to negotiate items such as closing date, repairs and contingencies when competition is thinner.
New construction picks up inventory slack
Weary buyers have turned to new single-family homes as a solution to a lack of affordable starter homes.
In fact, new-home sales soared 18.9 percent in September to a rate of 667,000, up from August’s upwardly revised rate of 561,000 units. That’s also 17 percent higher than September 2016 and the highest rate in nearly a decade.
Increased job growth and solid improvement in new households being formed are spurring would-be buyers to buy new homes.
New homes give buyers the chance to pick the ideal floor plan, amenities, lot and price point that suits them. Sure, you’ll pay more for new construction but the price difference might be minimal. Older resales might require substantial remodeling to fit your needs.
Other reasons for the expansion in new-home sales: ongoing job growth and improving household formations. (The latter is when two or more people live together in their own home apart from parents, friends or extended living situations.)
Building and completion of new homes still needs to catch up with massive buyer demand.
Meanwhile, buyers have a few things going in their favor: mortgage rates are still low and many lenders offer low-down payment programs for borrowers with strong credit and stable incomes.
Get today’s mortgage rates
Whether you plan to buy resale or new, use our tool to get today’s mortgage rates now. And, remember, mortgage rates could go up the longer you wait so it’s worth exploring a rate lock with your lender or builder.