Pending home sales took a deep dive in January, falling to their lowest level in over three years. The National Association of Realtors® (NAR) said its Pending Home Sales Index (PHSI), a forward-looking indicator of existing home sales, fell 4.7 percent to 104.6. The December index, which had represented an 0.5 percent increase from November, was revised down from 110.1 to 109.8. The January loss put pending sales 3.8 percent behind the pace in January 2017 and at its lowest level since October 2014.
Yun Blames Inventory, Cites Pent-Up Sellers
Lawrence Yun, NAR chief economist, noted that January's performance ended a three-month streak of modest increases. "The economy is in great shape, most local job markets are very strong and incomes are slowly rising, but there's little doubt last month's retreat in contract signings occurred because of woefully low supply levels and the sudden increase in mortgage rates," he said. "The lower end of the market continues to feel the brunt of these supply and affordability impediments. With the cost of buying a home getting more expensive and not enough inventory, some prospective buyers are either waiting until listings increase come spring or now having to delay their search entirely to save up for a larger down payment."
"As new multi-family supply catches up with demand and slows rents, some large investors may begin putting their holdings of affordable single-family homes up for sale, which would be great news, particularly for first-time buyers," said Yun. "Furthermore, sellers last year typically stayed in their home for 10 years before selling (an all-time high); although higher mortgage rates will likely discourage some homeowners from wanting a new home with a higher rate, there are possibly many pent-up sellers who may look to finally trade-up or move down this year."
Yun Misses the Boat, As Always
- The economy is not in "great shape".
- Jobs are a lagging indicator.
- Wage growth has not kept up home price growth.
- Given price increases, the notion of saving up for a down payment is essentially absurd.
- There is a wave of "pent-up" selling coming: When boomer parents die and kids sell the homes. Otherwise, would-be "pent-up" sellers undoubtedly seek more for their homes than they can get.
- Large investors sitting on inventory will also seek more for the homes than they are worth or new buyers can afford.
- Millennial attitudes towards home ownership have changed.
- Kids are moving in with their parents because they need to take care of them or because they cannot make it on their own.These are not would-be buyers.
Yun mentioned mortgage rates but he brushed that aside with fluff analysis on nearly every other point. When you are paid to cheerlead, you cheerlead.
Mike "Mish" Shedlock