“We may be starting to see rising home prices hurt affordability,” NAR’s chief economist says.
Pending home sales dipped slightly last month but continue to remain elevated compared to a year ago, the National Association of REALTORS® reported Monday. NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 1.1% in October but are up 20.2% year over year.
“Pending home transactions saw a small dropoff from the prior month but still easily outperformed last year’s numbers for October,” says Lawrence Yun, NAR’s chief economist. “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.”
NAR’s existing-home sales report, reflecting October data, showed median home prices nearly 16% higher than a year ago. The median existing-home price was $313,000 in October.
Housing inventories remain tight as buyers compete for the limited number of homes on the market. “Scarce housing and low [mortgage] rates plus very strong demand have pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers, who don’t have the luxury of using housing equity from a sale to use as a down payment,” Yun says. “Work-from-home flexibility has also increased the demand for both primary and secondary homes.”
The housing markets that have seen the largest recoveries since the COVID-19 pandemic began or that have exceeded their Jan. 20 levels are Las Vegas-Henderson-Paradise, Nev.; San Francisco; Seattle-Tacoma-Bellevue, Wash.; San Jose-Sunnyvale-Santa Clara, Calif.; and Los Angeles-Long Beach-Anaheim, Calif., according to realtor.com®’s Housing Market Recovery Index.
Contract signings were mixed across the country in October, although each of the four major regions posted annual gains. The South was the only region of the U.S. to eke out an increase in pending home sales in October month over month. However, double-digit gains annually continued across the country, led by the South with pending home sales up 21% compared to a year ago, followed by the West up 20.8% annually, a 19.6% increase in the Midwest, and an 18.5% increase in the Northeast.