Pending home sales for May 2017 fell for the third month in a row as tight supply and high prices seem to be slowing things down according to the National Association of Realtors (NAR). The Pending Home Sales Index is based on contract sales (not closed sales) and fell 0.8% to an index value of 108.5 (April the reading came in at 109.4).
The decrease is a 1.7% decline from the same period last year however the market remains solid. The West saw the biggest decline in pending home sales at a decrease of 4.5% which is not surprising since home values in the Western part of the country have seen significant increases in the last 6-12 months. With the high home values and limited supply you’re seeing potential homeowners re-looking at the important question of “How much house can I afford?” Understanding exactly what a home buyer can afford is essential.
What Could Derail The Increase:
There is always a risk to pending home sales and those risks include a huge move higher in interest rates, or tighter lending guidelines. Other risks include a slowing a economy or potential job losses. If you are looking to purchase a home, especially if you are a First Time Home Buyer, then make sure you keep an eye on what’s going on in the mortgage industry and the economy.
If you start to see lender restrictions tighten and/or the economy slow you may want to hold back on making an offer to see how things play out. Or at the very least be really cautious with your bid and don’t over pay for the home.
Entry Level Homes:
Entry level homes have seen a significant decline. Pending Homes Sales under $100,000.00 declined 7.2% compared to last year. Homes between $100,000.00 – $200,000.00 only increased 2.00% compared to last year. Mortgage rates entering the summer are at 2017 lows so that should help support the market but it may continue at these levels until more supply becomes available.
NAR Economist Yin:
According to the NAR Chief Economist Lawrence Yin; “Monthly closings have recently been oscillating back and forth, but this third consecutive decline in contract activity implies a possible topping off in sales. Buyer interest is solid, but there is just not enough supply to satisfy demand,” Yun said. “Prospective buyers are being sidelined by both limited choices and home prices that are climbing too fast. The lack of listings in the affordable price range are creating lopsided conditions in many areas where investors and repeat buyers with larger down payments are making up a bulk of the sales activity,” Yun said. “Meanwhile, many prospective first-time buyers can’t catch a break,” he said. “Prices are going up and there’s intense competition for the homes they’re financially able to purchase.”
Current Mortgage Rates:
If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.