The slowdown in contract signing in September is a likely sign that home price growth will soon come back to earth, said Lawrence Yun, chief economist at NAR.
Pending home sales fell 2.3% in September 2021 from the previous month and fell 8% year-on-year to an index of 116.7, the National Association of Realtors (NAR) reported on Thursday. .
A Pending Home Sales Index (PHSI) of 100 represents the level of contract activity in 2001.
The four major geographies saw contract signatures decline both on a monthly and annual basis.
Slowing market activity should help bring home price growth back to earth, NAR Chief Economist Lawrence Yun noted in the NAR report, which will no doubt be a welcome respite. for consumers.
âContract transactions slowed down a bit in September and are showing signs of a calmer trend in house prices as the market is comfortably ahead of pre-pandemic activity,â Yun said. âIt should be noted that there will be less inventory until the end of the year compared to the summer months, which happens almost every year. “
Although some buyers have decided to press a break in their home search amid intense competition and soaring prices this summer, Yun said a calming market and increased inventory would likely bring these back. buyers in 2022.
The strong growth in rents resulting from the withdrawal of buyers from the selling market will likely also contribute to their return to the selling market in the near future.
âRents have risen steadily in recent times, with rental vacancy rates falling,â Yun said. “This could cause more renters to seek homeownership in order to avoid rising inflation, so more inventory will be welcome.”
Based on the data currently available, NAR predicts that home sales will have increased 6.4% during 2021 by the end of the year. The association also predicts that sales will decline 1.7% in 2022, due to expectations of rising mortgage rates. Yun predicts that house prices will experience more moderate growth of just 2.8% in 2022, following the staggering 14.7% house price growth seen in 2021.
âWhile home selling activity has declined from its previous highs, it is leveling off at roughly a level of activity above the pre-pandemic rate thanks to a combination of enthusiastic young buyers, Persistent pandemic savings and low mortgage rates creating opportunities despite ongoing home price gains and rising mortgage rates, âsaid Danielle Hale, chief economist at realtor.com, in an emailed statement to Inman .
“Whether the housing market maintains this plateau and begins to grow or decline again depends on how the economy evolves, with housing construction and income growth being the main wildcards,” Hale added.
Pending home sales by region
The PHSI was the most affected year over year in the Northeast, where the index fell 18.5% from September 2020 to 93.1. On a monthly basis, the index was down 3.2%.
In the West, the index fell 7.2% from the previous year to 105.3, down just 1.4% from August 2021.
PHSI was down 5.8% year-on-year in the Midwest and South, to 111.4 and 139.1 respectively. In the Midwest, that figure was down 3.5% from the previous month, and in the South, it was down 1.4% month-over-month.
Email Lillian Dickerson