Is the Real Estate Market Receiving a Course Correction?
Due to higher home prices and interest rates, pending home sales across the country continue to retreat from multiyear highs. The Pending Home Sales Index, a forward-looking indicator based on contract signings, plunged 5.6 percent to 101.6 in September compared to a downwardly revised 107.6 in August, according to the National Association of Realtors.
After posting its strongest pace since 2006 in May, the index has now declined for four consecutive months to reach its worst level since December 2012. Economists expected the index to remain mostly unchanged.
Lawrence Yun, the National Association of Realtors’s chief economist, believes affordability was the biggest issue, while government shutdown concerns may have added to the weakness. “Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity,” he said. “In addition, government and contract workers were on the sidelines with growing insecurity over lawmakers’ inability to agree on a budget. A broader hit on consumer confidence from general uncertainty also curbs major expenditures such as home purchases.”