Every bit of recent news indicated that the nation’s housing market was going gangbusters with no signs of a slowdown, but maybe things aren’t quite as rosy as they appear.
Just last week, data from the National Association of Realtors showed that existing-home sales rose in October, the fifth straight month that existing-home sales have risen.
But, a new report from NAR indicates that home sales may be slowing down as the year comes to a close.
According to NAR, pending home sales actually fell slightly in October.
Pending home sales data is different from existing-home sales data. The existing-home sales data shows completed sales of existing homes, while the pending homes sales report is forward-looking indicator that is based on signed contracts.
October’s pending home sales report showed that contract signings fell for the second straight month, indicating that home sales may actually fall in November and December compared to the rest of 2020.
It’s important to note, however, that contract signings in October were up 20.2% from the same month last year, further evidence of how hot the housing market has been and still is.
But, as NAR Chief Economist Lawrence Yun notes, the impact of home prices consistently rising coupled with incredibly low inventory could be leading to a slight slowdown in the housing market, albeit one that’s likely still above last year.
"The housing market is still hot, but we may be starting to see rising home prices hurting affordability,” Yun said. “The combination of these factors – scarce housing and low rates – plus very strong demand has 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.”
Broken down by region, pending home sales fell in two of the four major areas tracked by NAR. According to NAR, contract signings were down in the Northeast and Midwest, remained flat in the West, and barely increased in the South.