It’s becoming very clear that a decent number of prospective buyers this year continue to be pinched by supply shortages and the subsequent run-up in home prices. That’s why only one region saw an uptick in contract activity in August. Can you guess where?
With its slower price growth and better inventory levels, only the Northeast saw a bump in contract signings (1.3 percent). Overall, pendings slumped in August and have now declined in three of the past four months.
The chart (above) reflecting the percent change in prices in August compared to a year ago tells the entire story. The ascending price movements in the Midwest, South and West coincide with how much of a decline each region saw last month (MW: -0.9%; S: -3.2%; W: -5.3%).
Looking ahead, with the expected drawback in listings that accompanies the changing of the seasons, prices could accelerate and make finding an affordable home even more of a struggle. More new home construction is needed to improve the odds of this not occurring.
The one silver-lining in recent months is that despite the current supply and affordability challenges that continue to hinder buyers, existing sales are still expected to be around a 5.36 million annualized sales pace for the year, which is a 2.1 percent increase from 2015 and the highest annual pace since 2006 (6.48 million).
Check out the August Pending Home Sales video to watch NAR Chief Economist Lawrence Yun discuss today’s report, what’s in store for the rest of the year and if the Federal Reserve will end up raising short-term rates in 2016.