NAR: Strong demand in South, West drives pending home sales up 1.5% in September

Dive Brief:

Pending home sales increased 1.5% in September to a reading of 110 from a downward-revised 108.4 in August, according to the National Association of Realtors’ Pending Home Sales Index.
September’s rate is 2.4% higher than a year ago. The monthly increase beat analyst expectations of a 1% gain, according to MarketWatch
The index has posted year-over-year gains for 22 of the past 25 months. Pending home sales in the West leapt 4.7% from August to September and is 4% ahead of a year ago; sales in the South increased 1.9% from August to September and are 7.7% ahead of September 2015. The Midwest and Northeast both posted month-over-month declines at 0.2% and 1.6%, respectively. The Northeast is up 7.7% from September 2015, while the Midwest is 1.0% below the year-ago mark.

September 2016 pending home sales — National Association of Realtors

Dive Insight:

Strong demand in the South and West drove September’s pending sales figure. Overall, strong new and existing sales and fewer distressed sales point to continued recovery, NAR Chief Economist Lawrence Yun said in a release. However, tight inventory, which the Commerce Department reported at 4.8 months in September compared to 5.8 a year earlier, remains a challenge. "It's leading to home prices outpacing wages, properties selling a lot quicker than a year ago and the home search for many prospective buyers being highly competitive and drawn out because of a shortage of listings at affordable prices," Yun said in a release.

Thursday’s pending home sales report concludes the monthly run of housing market data, which painted a mixed picture of recovery in the third quarter. Housing starts were at their lowest level since March 2015 in September, falling short of analyst expectations as a cooling in the multifamily sector pulled the entire market down 9% for the month and 11.9% year over year. Single-family starts, however, were up for the month and the year, indicating growing demand for new construction.

That’s supported by existing home sales, which rallied in September on the strength of first-time buyers, many of whom are between the ages of 25 and 34. That group took a 34% share of existing sales during the month, the biggest in more than four years. Economists told Construction Dive earlier this month that first-time buyers are still off their 40% prerecession claim. One holdup is tight inventory, as current homeowners fail to trade-up to larger homes in great enough numbers to make homeownership viable for new buyers in some of the country’s most competitive markets.

Builders are confident that the pent-up demand will loosen soon. The National Association of Home Builders/Wells Fargo Housing Market Index fell two points in October to its second-highest level in a year at a reading of 63. Sales expectations for the next six months are even higher, at a mark of 72.