A gauge of pending home sales unexpectedly declined in September for the first time in five months, a sign elevated asking prices and lean supply are tempering the boom in housing despite the record-low interest rates.
The National Association of Realtors' index of contract signings to purchase previously owned homes decreased 2.2%
"The demand for home buying remains super strong, even with a slight monthly pullback in September, and we’re still likely to end the year with more homes sold overall in 2020 than in 2019," Lawrence Yun, NAR's chief economist, said in a statement. "With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future."
The drop in the index may represent a pause in the housing surge as lean inventory causes prices to soar. For most of the year, Americans have been snapping up larger, suburban houses that double as their remote workplaces. The decline in September contract signings is consistent with a retreat in mortgage applications in recent weeks.
More homebuyers are at risk of being priced out of the market if the volume of available properties remains limited and causes bidding wars. While the borrowing costs are ultra-low, higher asking prices can make it more difficult for buyers to come up with down payments.
By region, pending home sales fell in three of four regions, including a 3.2% drop in the Midwest. Contract signings also declined 3% in the South and 2.6% in the West.
The government's first estimate of third-quarter gross domestic product underscored the recent strength in housing. Residential investment jumped an annualized 59.3%, the fastest since 1983, Commerce Department data showed Thursday. GDP rose at a record 33.1% annualized rate during the period.
A separate report on Monday showed that purchases of new single-family houses declined slightly from a near 14-year high but remained elevated, another evidence of the strong appetite in residential real estate.
