High prices and low inventory kept homebuyers at bay in October. Signed contracts to buy existing homes were essentially flat from September, eking out a 0.2 percent gain, according to the National Association of Realtors' monthly index of pending sales.
It was an improvement, however, as pending sales had fallen sequentially for the previous two months. Pending sales are 3.9 percent higher than in October 2014 and have seen annual gains for the past 14 months. These contracts are a forward-looking indicator of closed sales in November and December.
"Contract signings in October made the most strides in the Northeast, which hasn't seen much of the drastic price appreciation and supply constraints that are occurring in other parts of the country," said Lawrence Yun, the Realtors' chief economist. "In the most competitive metro areas — particularly those in the South and West — affordability concerns remain heightened as low inventory continues to drive up prices."
After a busy spring, home sales have trended down slightly, but strong job growth in some markets has kept the overall pace improved from last year. The notable exceptions, according to the Realtors, are areas that are reliant on oil-related jobs.
Closed sales of existing homes fell 3.4 percent in October from September, a wider-than-expected drop.
Home prices in September were 5.5 percent higher than in September 2014, according to Black Knight Financial Services. Prices are now just 5.4 percent off their June 2006 peak.
Prices are being bolstered by continued lack of supply. There were 4.5 percent fewer homes listed for sale in October than in October 2014. The Realtors now forecast just 3 percent more sales in 2016 compared with this year, due to falling inventory and rising prices. Mortgage interest rates have been rising for the past several weeks and could see bigger gains going into 2016 if the Federal Reserve raises rates in December.
Pending home sales rose 4.5 percent month-to-month in the Northeast and by 1.7 percent in the West. Sales fell 1 percent in the Midwest and by 1.7 percent in the South.