US pending home sales drop more than expected in August
US pending home sales fell more than expected in August, according to figures from the National Association of Realtors.
The NAR's monthly index declined 2.6% to 106.3 from 109.1 in July, marking its lowest reading since January 2016 and missing expectations for a much smaller drop of 0.5%.
The NAR's chief economist, Lawrence Yun, said: "August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes.
"Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search."
The pending home sales index in the Northeast was down 4.4% to 93.4 in August and is now 4.1% below the year before. In the Midwest, the index was 1.5% lower at 101.8 and is now 3.2% below August 2016.
Pending home sales in the South fell 3.5% to 118.8 last month and are now 1.7% below last August, while the index in the West was 1% lower at 101.3 and is now 2.4% below a year ago.
The NAR said that slower activity in the areas hit by Hurricanes Irma and Harvey is likely to push existing sales for the year below the pace set in 2016. Yun now expects existing home sales to close out the year at around 5.44 million, down 0.2% on the year.
"The supply and affordability headwinds would have likely held sales growth just a tad above last year, but coupled with the temporary effects from Hurricanes Harvey and Irma, sales in 2017 now appear will fall slightly below last year," he said. "The good news is that nearly all of the missed closings for the remainder of the year will likely show up in 2018, with existing sales forecast to rise 6.9%.”
Pantheon Macroeconomics said: "The mortgage applications numbers pointed to a clear increase in pending home sales, so the drop presumably is due to the impact of Hurricane Harvey. We expect a further decline in September as a result of Irma. The August index is a 19-month low, consistent with September existing home sales falling to just under 5.3m, from 5.35m in August. We would not be surprised by a lower number, because people evacuated from Florida will not have been able to attend closings, the point at which existing home sales are measured. Looking ahead to October and beyond, though, we expect to see a clear rebound in sales of both new and existing homes."