Dive Brief:

• Pending home sales slid 2.4% to 108.5 in August from a downward-revised 111.2 in July, turning in the lowest levels since January (105.4), according to the National Association of Realtors’ Pending Home Sales Index.
• August’s rate is slightly below the 108.7 recorded in August 2015. Analysts were expecting a 0.5% gain over July 2016, MarketWatch reported.
• The Northeast was the only region to post a gain in pending home sales in August, rising 1.3% to 98.1 and up 5.9% year over year. The Midwest dipped 0.9% to 104.7 in August, down 1.7% year over year. The South dropped 3.2% to 119.8, down 1.5% year over year, and the West slid 5.3% to 102.8 in August, down 0.6% from August 2015.

Dive Insight:

The NAR cited limited housing inventory for August’s slowdown in pending home sales. Unless construction activity picks up, the continued recovery in the housing market could stagnate while home prices continue to rise nationwide, according to NAR Chief Economist Lawrence Yun. Housing inventory was down 6.7% year over year in the third quarter, according to real estate website Trulia, a supply that could be exhausted in 4.6 months, rather than the typical six-month supply. Meanwhile, home prices have increased 5% annually for the last two years and are projected to continue.

"Contract activity slackened throughout the country in August except for in the Northeast, where higher inventory totals are giving home shoppers greater options and better success signing a contract," NAR Chief Economist Lawrence Yun said in a statement. "In most other areas, an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the miniscule number of affordable listings."

Thursday’s pending home sales report rounds out an otherwise-encouraging month of housing and construction data. The skilled labor shortage continues to drag construction employment down, slowing payroll gains to a three-year low. Despite the shortage of suitable workers, there is plenty of construction activity to keep firms busy, with industry job openings at their highest levels in a decade. Housing starts cooled as expected after a hot July, dipping to 1.14 million in August, while homebuilder confidence soared to its highest level in nearly a year, and nonresidential construction spending hit an all-time high. The experts agree, however, that the key to continued recovery is an increase in new, single-family residential construction. 

To see all the latest construction data in one place, check out our Industry Pulse page here.