US Pending Home Sales Posts 2.4% Slump

There was a 2.4% decline in the number of contracts signed by home-buyers for the month of August, this is worse than the unchanged reading analysts had earlier forecasted in a survey conducted by Thomson Reuters. This is also the third time in 4 months that a slowing has been reported for the release, pulling the Pending Home Sales Index lower to 108.5, the least reading since the month of January where it was seen at 105.4. On a year over year basis, pending home sales currently reflect a 0.2% drop.

A decrease in contract signings was reported in 3 of the 4 major regions within the month. According to the National Association of Realtors the West posted a decline of 5.3% which was the largest in all regions, the South posted a slump of 3.2% and the Midwest region dropped by 0.9%, as the Northeast which was the only positive region reported a rise of 1.3% in the month of August.

“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. 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.” Lawrence Yun, the NAR chief economist stated.

New home construction has not picked up much this year, with single family housing starts falling 6 percent in August compared to July, according to the U.S. Census. Yun warned that without bigger gains in home construction, the current housing recovery could stall. The supply of homes for sale has declined on an annual basis for 15 consecutive months, and homes are selling at a far quicker pace compared to a year ago.

The stark lack of supply continues to push home price gains. A monthly reading of home prices nationally in July by S&P CoreLogic Case-Shiller showed a 5.1% annual gain, up from 5.0% in June. Prices also posted monthly gains.

"The S&P CoreLogic Case-Shiller National Index is within 0.6 percent of the record high set in July 2006. Seven of the 20 cities have already set new record highs," noted David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. "Eight of the cities are seeing prices up 6 percent or more in the last year. Given that the overall inflation is a bit below 2 percent, the pace is probably not sustainable over the long term."

Markets showed limited response to today’s data. The ICE US Dollar Index is currently higher by 0.18% to 95.60. The stock market is relatively unchanged on the day. The S&P 500 is currently lower by 0.07% to 2,169.80. Gold is unchanged at $1,323 per ounce. WTI crude oil is trading higher by 0.40% to $47.30.