Pending Home Sales Fall 1.1% In October

A gauge of pending home sales fell 1.1% in October, signaling that upcoming deals could slow down, the National Association of Realtors reported Wednesday. The index of pending home sales hit a seasonally adjusted 104.1 in October, compared with 105.3 in September. “Demand is holding steady but would be more robust if it weren’t for lagging wage growth and tight credit conditions that continue to hamper those individuals looking for relief from rising rents,” said Lawrence Yun, NAR’s chief economist. Pending sales typically close within two months. An index reading of 100 equals 2001′s average contract activity level.

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U.S. pending home sales slipped in October

The number of Americans signing contracts to buy homes fell slightly in October as tight credit and lagging wages remained financial hurdles for would-be homebuyers.

The National Association of Realtors said Wednesday its seasonally adjusted pending home sales index fell 1.1 percent in the past month to 104.1. The index remains below its 2013 average but is 2.2 percent higher than last October.

Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale. The number of contract signings rose in the Northeast but fell in the Midwest, South and Western regions of the U.S.

Pantheon Macroeconomics’ Ian Sheperdson said the latest numbers are “more evidence that the trend in housing market activity is flat, despite the gains in existing home sales in the past couple of months.”

Sales of existing homes rose 1.5 percent to 5.26 million last month, the briskest pace this year.

Housing has struggled to fully rebound since the recession ended more than five years ago. Many potential buyers lack the savings and strong credit history needed to afford a home, causing them to rent or remain in their existing houses instead of upgrading. Harsh winter weather crippled sales at the beginning of 2014, just as rising home prices and essentially flat incomes limited the supply of affordable homes for many Americans.

The realtor group noted Wednesday that the average home price for October was $208,300. Monthly price growth for existing homes has slowed to 5.8 percent in 2014, leveling off from a rate of 11.5 percent last year. The group’s chief economist suggests the slower pace will keep affordability in check for prospective homebuyers.

The Realtors estimate that 4.94 million existing homes will be sold this year, down 3 percent from 5.09 million in 2013. Analysts say sales of roughly 5.5 million existing homes are common in a healthy real estate market.

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Self-Directed IRA real estate investors are happy to see that the existing home sale prices are up in all regions. While the recovery is slow, it is positive to see the trend climbing.

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Self-Directed IRA real estate investors are happy to see that the existing home sale prices are up in all regions. While the recovery is slow, it is positive to see the trend climbing.

As shown in the report, each region is experiencing a different level of increase. That would leave people wondering if it might be better to in invest in real estate in one region versus another. There is no magic answer to this question. Depending on the investors investment strategy, the answer differs from case to case even within the same region. For instance, if an investor is buying homes to rent them out for monthly income, then the price of the real estate is important and the rental trends in the area are equally if not more important. On the flip side, if an investor is into fixing and flipping properties, then they are looking for an under priced home in a great area. This allows them to buy it low, fix it and then sell it quickly for a nice profit.

Another consideration is the cost of living in the area an investor is looking at. For instance the report by The National Association of Realtors shows that the Western region is experiencing the highest increase at 5% over last year. Investors in that area, need to take into account not only the value of the real estate but also the high cost of living in those areas.

In real estate as with all investments, it is important to understand that while the trend is currently showing an increase, there is always a chance that the market can turn down. This should never paralyze investors with fear and prevent them from acting; instead it should encourage them to perform careful due diligence and to consult with the appropriate professionals regarding any investment they are considering.

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Signed contracts to buy homes fall 1.1 per cent in October

By The Associated Press

WASHINGTON – The number of Americans signing contracts to buy homes fell slightly in October as tight credit and lagging wages remained financial hurdles for would-be homebuyers.

The National Association of Realtors said Wednesday its seasonally adjusted pending home sales index fell 1.1 per cent in the past month to 104.1. The index remains below its 2013 average but is 2.2 per cent higher than last October.

Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale. The number of contract signings rose in the Northeast but fell in the Midwest, South and Western regions of the U.S.

Pantheon Macroeconomics’ Ian Sheperdson said the latest numbers are “more evidence that the trend in housing market activity is flat, despite the gains in existing home sales in the past couple of months.”

Sales of existing homes rose 1.5 per cent to 5.26 million last month, the briskest pace this year. And in a separate report Wednesday, the Commerce Department said sales of new U.S. homes rose a mild 0.7 per cent in October.

Housing has struggled to fully rebound since the recession ended more than five years ago. Many potential buyers lack the savings and strong credit history needed to afford a home, causing them to rent or remain in their existing houses instead of upgrading. Harsh winter weather crippled sales at the beginning of 2014, just as rising home prices and essentially flat incomes limited the supply of affordable homes for many Americans.

The realtor group noted Wednesday that the average home price for October was $208,300. Monthly price growth for existing homes has slowed to 5.8 per cent in 2014, levelling off from a rate of 11.5 per cent last year. The group’s chief economist suggests the slower pace will keep affordability in check for prospective homebuyers.

The Realtors estimate that 4.94 million existing homes will be sold this year, down 3 per cent from 5.09 million in 2013. Analysts say sales of roughly 5.5 million existing homes are common in a healthy real estate market.

US pending home sales slip in October

WASHINGTON (AP) — The number of Americans signing contracts to buy homes fell slightly in October as tight credit and lagging wages remained financial hurdles for would-be homebuyers.

The National Association of Realtors said Wednesday its seasonally adjusted pending home sales index fell 1.1 percent in the past month to 104.1. The index remains below its 2013 average but is 2.2 percent higher than last October.

Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale. The number of contract signings rose in the Northeast but fell in the Midwest, South and Western regions of the U.S.

Pantheon Macroeconomics’ Ian Sheperdson said the latest numbers are “more evidence that the trend in housing market activity is flat, despite the gains in existing home sales in the past couple of months.”

Sales of existing homes rose 1.5 percent to 5.26 million last month, the briskest pace this year. And in a separate report Wednesday, the Commerce Department said sales of new U.S. homes rose a mild 0.7 percent in October.

Housing has struggled to fully rebound since the recession ended more than five years ago. Many potential buyers lack the savings and strong credit history needed to afford a home, causing them to rent or remain in their existing houses instead of upgrading. Harsh winter weather crippled sales at the beginning of 2014, just as rising home prices and essentially flat incomes limited the supply of affordable homes for many Americans.

The realtor group noted Wednesday that the average home price for October was $208,300. Monthly price growth for existing homes has slowed to 5.8 percent in 2014, leveling off from a rate of 11.5 percent last year. The group’s chief economist suggests the slower pace will keep affordability in check for prospective homebuyers.

The Realtors estimate that 4.94 million existing homes will be sold this year, down 3 percent from 5.09 million in 2013. Analysts say sales of roughly 5.5 million existing homes are common in a healthy real estate market.

Pending Home Sales Decrease In October On Buyer Hesitation

Pending home sales are a forward indicator of residential real estate sales

The National Association of Realtors, NAR, put out its Pending Home Sales Index. It tracks the number of home sales under contract. This tends to lead the actual home sales data by a few months.

Home sales data is an indicator of the real estate market’s health. Recently, the market has been characterized by limited supply. Homeowners who aren’t desperate to sell have removed their properties in hopes of getting a better price.

While the headline real estate appreciation numbers have been large, they’ve been concentrated primarily in the major West Coast markets—especially the markets hit the hardest in the downturn. The rest of the country has been experiencing low single-digit appreciation.

Highlights from the report

The Pending Home Sales Index, PHSI, is a proprietary index from the National Association of Realtors based on contract signings. It fell 1.1%, from 105.3 in September to 104.1 in October. The index was 2.2% higher than in October 2013. Rising home prices and rising mortgage rates have been affecting sales.

Implications for homebuilders

Given that the first-time homebuyer is still in a difficult financial situation with a weak job market and high student loan debt, homebuilders are focusing more on the move-up buyer. Until recently, the move-up buyer was more or less stuck because of negative equity—or a complete lack of entry-level homebuyers. With professional investors bidding up property, move-up buyers finally have an outlet for their current home.

That said, the theme of the real estate market is still restricted supply. A lot of capital has been raised for rental properties. Sellers are noticing that prices are increasing again. The lack of existing homes for sale has helped create demand for new homes.

A combination of higher borrowing rates and limited supply has made the first-time homebuyer pull back from the market. Pretty much every homebuilder, including PulteGroup (PHM), D.R. Horton (DHI), Lennar (LEN), and Ryland (RYL), has noticed buyer hesitation. Given that builders have been increasing average selling prices by building bigger homes, the luxury end has been performing the best.

Investors who are interested in trading the homebuilding sector as a whole should look at the SP SPDR Homebuilder ETF (XHB).

More From Market Realist

Existing Home Sales Rise While Inventory Remains Tight

Critical Builder Releases: Housing Starts, Sales Permits, and Prices (Part 3 of 5)

(Continued from Part 2)

Existing home sales decrease to 5.26 million in October

The National Association of Realtors (or NAR) reports existing home sales once a month. The seasonally adjusted number reports the completed transactions in single-family homes, condominiums, townhomes, and co-ops. The report includes data points like existing home sales, inventory of houses for sale, median house price, mortgage rates, and median time on the market.

In September, existing home sales were an annualized 5.18 million.


Restricted supply 

At the end of October, there were 2.22 million existing homes for sale. This represented a 5.1-month supply. This is higher than the 2.11 million homes for sale last year. A level of 6 to 6.5 months means a balanced market. Even though inventory is building, we’re still at tight levels.

Professional investors have become major players in the real estate market. As a result, we’re seeing bidding wars for properties in the hardest-hit markets—like Phoenix. We’re even seeing bidding wars in strong markets—like Washington, DC. There were fears that a flood of properties would hit the market and drive down prices. However, the opposite problem occurred. The NAR forecasts that the jump in rates will begin to affect affordability in high-cost areas like California and the New York City metropolitan area.

Prices continue to rise

The median sale price for an existing home was $208,300. This is up 5.5% year-over-year (or YoY). There’s definitely more demand than supply in the market. Some hot markets—like San Francisco and Phoenix—are experiencing bidding wars like we saw in 2006.

The increase in median home prices is somewhat overstated. Most of the transactions are concentrated in a few areas. We aren’t seeing such large increases in prices nationwide.

Homebuilder earnings were generally strong

Third quarter earnings for the builders are pretty much over. Last quarter, the builders with more exposure to the first-time homebuyer included companies like KB Home (KBH), PulteGroup (PHM), and D.R. Horton (DHI). Builders with West Coast exposure, like Lennar (LEN) did well.

Investors who want to gain exposure to the entire homebuilding sector should look at the SP SPDR Homebuilder ETF (XHB).

Visit the Market Realist homebuilders page to learn more about the industry.

Continue to Part 4

Browse this series on Market Realist:

Pending Home Sales Slow in October but Remain Higher Than a Year Ago

WASHINGTON, DC–(Marketwired – Nov 26, 2014) –  Pending home sales declined in October but remained at a healthy level of activity and are above year-over-year levels for the second straight month, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, decreased 1.1 percent to 104.1 in October from an upwardly-revised 105.3 in September, but is 2.2 percent higher than October 2013 (101.9). The index is above 100 — considered an average level of contract activity — for the sixth consecutive month.

Lawrence Yun, NAR chief economist, says despite October’s modest decline, contract signings have remained at a healthy pace now for six straight months. “In addition to low interest rates, buyers entering the market this autumn are being lured by the increase in homes for sale and less competition from investors paying in cash,” he said. “Demand is holding steady but would be more robust if it weren’t for lagging wage growth and tight credit conditions that continue to hamper those individuals looking for relief from rising rents.” 

The median existing-home price1 for all housing types in October was $208,300, which is 5.5 percent above October 2013. Monthly median price growth has averaged 5.8 percent in 2014 (through October) after averaging 11.5 percent last year.

“The increase in median prices for existing-homes has leveled off, representing a healthier pace that has kept affordability in-check for buyers in many parts of the country while giving more previously stuck homeowners with little or no equity the ability to sell,” says Yun.

Yun says evidence of rising home prices allowing more willing homeowners the ability to sell can be found in NAR’s annual survey released earlier this month, which revealed that the typical seller over the past year was in their home for 10 years before selling — an all-time survey high for tenure of home. 

NAR also recently released its economic and housing forecast for 2015 and 2016. Yun is forecasting existing-home sales this year to fall slightly below 2013 (5.1 million) to 4.9 million, and then increase to 5.3 million next year and 5.4 million in 2016. Yun expects the national median existing-home price to rise 4 percent both next year and in 2016.

The PHSI in the Northeast inched 0.5 percent to 87.9 in October, and is now 3.4 percent above a year ago. In the Midwest the index slightly declined 0.6 percent to 100.6 in October, and is now 3.0 percent below October 2013. 

Pending home sales in the South decreased 1.0 percent to an index of 118.3 in October, but is still 3.9 percent above last October. The index in the West fell 3.2 percent in October to 98.1, but remains 4.1 percent above a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

1 The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.

* The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

NOTE: Existing-home sales for November will be reported December 22, and the next Pending Home Sales Index will be December 31; release times are 10:00 a.m. EST.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the “News, Blogs and Videos” tab on the website. Statistical data in this release, as well as other tables and surveys, are posted in the “Research and Statistics” tab.

Pending Home Sales Drop in October

The National Association of Realtors (NAR) Wednesday morning released its data on pending sales of existing homes in October. The pending home sales index slipped 1.1% from an upwardly revised index reading of 105.3 in September to the October reading of 104.1. That’s 2.2% higher than in October 2013 when the index reading was 101.9. The consensus estimate called for a month-over-month increase of 0.6% in pending sales. The index reflects signed contracts, not sales closings. An index reading of 100 equals the average level of contract signings during 2001.

The index is above 100 for the sixth consecutive month even though were October sales down slightly. The NAR’s chief economist noted:

In addition to low interest rates, buyers entering the market this autumn are being lured by the increase in homes for sale and less competition from investors paying in cash. Demand is holding steady but would be more robust if it weren’t for lagging wage growth and tight credit conditions that continue to hamper those individuals looking for relief from rising rents.

ALSO READ: The Most Educated Cities

Pending home sales in the Northeast U.S. increased 0.5% in October, posting an index reading of 87.9, but up 3.4% from October 2013. The index fell 0.6% in the Midwest and is 3% below last year’s reading. Pending sales dropped 1% in the South, but remain 3.9% higher than a year ago, and sales fell 3.2% in the West, but remain 4.1% above year-ago sales.

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Best Benefit Ever: Helping Realtors Optimize Their Online Presence

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The National Association of Realtors is giving members web tools to boost their .realtor domains.

What’s the benefit? Only three months after its announcement that members are eligible for personalized top-level domains, the National Association of Realtors is expanding its digital assistance with supplementary web and virtual marketing tools. NAR has partnered with real estate website and marketing platform Placester to offer exclusive pricing and features for members’ websites, including six months of free web hosting and design to any member with a .realtor domain. NAR members will also have access to Placester’s complimentary educational content, including how-to documents, infographics, videos, and webinars, all with the goal of creating impressive websites to assist in revenue growth and lead generation. Bob Goldberg, NAR senior vice president of marketing and business, said in a statement that the partnership “will make it straightforward and effortless for our members to create their own online presence.”

Why it works for members: Digital competition in the real estate industry is intensifying, and simply listing properties online doesn’t cut it anymore. Placester’s resources, coupled with a .realtor domain, give NAR members a competitive advantage. As Placester CEO Matt Barba said in a statement, the partnership allows brokers and agents to “take control of their online presence.”

Other benefits: Through the Realtor Benefits Program, members can take advantage of discounts for other marketing resources through companies such as Lowe’s and FedEx Office. And Placester will soon offer NAR members templates that include Realtor trademarks and value statements for their .realtor sites.

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Julia Haskins is a contributor to Associations Now. More »