After Brisk Summer, Pending Home Sales Drop in August
Fewer Americans signed contracts to buy existing homes in August. After gains in home sales over the spring and summer, an industry survey surprised expectations, registering a 2.6 percent drop in pending home sales from July. This drop forecasts that final closings on existing homes will be lower heading into fall.
“The performance in month-to-month contract signings has been uneven with ongoing shortages of lower priced inventory in much of the country, and across most price ranges in the West, but activity has remained at notably higher levels this year,” wrote National Association of Realtors’ chief economist Lawrence Yun in a release.
Yun pointed out that contract signings have been up year-over-year for sixteen consecutive months, which indicates overall home sales will be higher in 2012 than 2011. The Realtors predict a 9 percent gain to 4.64 million units.
Regionally, pending home sales rose slightly in the Northeast, up 0.9 percent month-to-month, but fell 2.6 percent in the Midwest, 1.1 percent in the South, and really plummeted out West, down 7.2 percent.
The drop in the West is largely due to a supply issue on the low end of the market. Investors have been fueling the low end with all-cash, bulk purchases of foreclosures in markets like Phoenix, Las Vegas, and parts of Southern California. Supplies of those homes have dropped dramatically, leaving little for those investors to buy.
Some housing analysts are concerned that the housing recovery so far has been driven so much by all-cash investors that as these supplies dwindle, due to continuing bank delays and more loan modifications, the overall home sales numbers will drop going into the end of the year.
New home sales for August also disappointed, coming in lower than expected. New home sales are measured by signed contracts, rather than closings.
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