Pending home sales faltered in January to a 12-month low, despite a simultaneous shoot-up in existing-home sales, according to the National Association of REALTORS® (NAR). NAR’s Pending Home Sales Index (PHSI) declined 2.8 percent to 106.4, with the PHSI sinking in the Midwest, 5.0 percent to 99.5, and in the West, 9.8 percent to 94.6.
“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,” says Lawrence Yun, NAR chief economist. “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. Most notably in the West, it’s not uncommon to see a home come off the market within a month.
“Sales got off to a fantastic start in January, but last month’s retreat in contract signings indicates that activity will likely be choppy in coming months as buyers compete for the meager number of listings in their price range,” Yun says.
“This spring is shaping up to be frenzied and frustrating for buyers thanks to a lack of homes on the market, something that became clear with the surprise decrease in seasonally adjusted pending home sales,” says Jonathan Smoke, realtor.com® chief economist. “The biggest impediment to growth in home sales in the months ahead will be the supply of homes for sale. The existing-home market had 3.6 months of supply in December and January; the only other time in history with that low level of supply was January 2005, which was just before the peak of the housing boom and bubble.
“Based on realtor.com’s inventory and traffic in February, we are anticipating another month of record prices, record low inventory, and record inventory movement,” Smoke says. “Buyers have started the spring buying season early to get their dream home before competition grows in the traditionally stronger spring season—but competition is already heated and will only continue to become more intense.”
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