PhotoFor the fifth time in six months, pending home sales – based on contract signings – were lower in August.

The National Association of Realtors (NAR) reports its Pending Home Sales Index (PHSI) fell 2.6 percent last month to 106.3 -- its lowest reading since January 2016.

NAR Chief Economist Lawrence Yun blames low supply levels and rising prices.

“August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,” he said. “Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search.”

A bleak outlook

Slower activity in the areas hit hard by Hurricanes Harvey and Irma will likely pull existing sales for the year below the pace set in 2016.

Yun believes Harvey’s damage to the Houston region contributed to the South’s waning contract signings in August, and will likely continue to do so in the months ahead.

Furthermore, he thinks the temporary pause in activity in Florida this month will slow overall sales even more in the South.

The NAR is now forecasting sales of existing homes will close out the year at around 5.44 million, which comes in slightly below (0.2 percent) the pace set in 2016 (5.45 million).

Additionally, the national median existing-home price this year is expected to increase around 6 percent.

Last year, existing sales rose 3.8 percent with prices gaining 5.1 percent.

“The supply and affordability headwinds would have likely held sales growth just a tad above last year, but, coupled with the temporary effects from Hurricanes Harvey and Irma, sales in 2017 will fall slightly below last year,” said Yun. “The good news is that nearly all of the missed closings for the remainder of the year will likely show up in 2018, with existing sales forecast to rise 6.9 percent.”

Regional breakdown

  • The PHSI in the Northeast fell 4.4 percent to 93.4 last month and is now 4.1 percent below a year ago.
  • In the Midwest the index dipped 1.5 percent to 101.8 and is now down 3.2 percent from August 2016.
  • Pending home sales in the South were off 3.5 percent for a reading of 118.8 and are 1.7 percent below the previous August.
  • The index in the West declined 1.0 percent to 101.3 and is 2.4 percent below the same time last year.

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