January Pending Home Sales Rpt.

Pending Home Sales Weaken in January
MEDIA CONTACT: ADAM DESANCTIS / 202-383-1178 / EMAIL (LINK SENDS E-MAIL)

WASHINGTON (February 27, 2017) — Insufficient supply levels led to a lull in contract activity in the Midwest and West, which dragged down pending home sales in January to their lowest level in a year, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, decreased 2.8 percent to 106.4 in January from an upwardly revised 109.5 in December 2016. Although last month’s index reading is 0.4 percent above last January, it is the lowest since then.

Lawrence Yun, NAR chief economist, says home shoppers in January faced numerous obstacles in their quest to buy a home. “The significant shortage of listings last month along with deteriorating affordability as the result of higher home prices and mortgage rates kept many would-be buyers at bay,” he said. “Buyer traffic is easily outpacing seller traffic in several metro areas and is why homes are selling at a much faster rate than a year ago 1. Most notably in the West, it’s not uncommon to see a home come off the market within a month.”…

https://www.nar.realtor/news-releases/2017/02/pending-home-s…

JT

along with deteriorating affordability as the result of higher home prices and mortgage rates

This phrase seemed out of place. So buyers are outnumbering sellers, but the buyers can’t afford to buy? I am at a loss for the upshot implied here.

Bear

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along with deteriorating affordability as the result of higher home prices and mortgage rates

This phrase seemed out of place. So buyers are outnumbering sellers, but the buyers can’t afford to buy? I am at a loss for the upshot implied here.

Bear

Perhaps it means that the - want to be buyers - are getting turned off at increasing prices.
If I have been considering buying a house for the last couple of years and every month
the news tells me prices are higher than the month before…over and over.
And now increasing commentary on higher interest rates may continue all year with several rate jumps.

Prices may level off soon, me thinks.

JT

Prices may level off soon, me thinks.

Hi JT

Not necessarily! It sounds like we are dealing with supply and demand, with a lot more demand than supply. If you are a new home builder with, say, a 20% net margin, raising your prices by 5% will increase your profit per house by 25%. You may see it as a good deal to sell 10% fewer houses but make considerably more total profit. And you have saved 10% of your bought-and-paid-for lots to build on another day! Just a different way of looking at it.

Saul

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So buyers are outnumbering sellers, but the buyers can’t afford to buy? I am at a loss for the upshot implied here.

Want is not demand. Want plus money is demand. :wink:

Denny Schlesinger

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If you are a new home builder with, say, a 20% net margin, raising your prices by 5% will increase your profit per house by 25%.

Implicit in that is the assumption that construction costs remain flat. We know from experience they don’t. When builders raise prices their suppliers and contractors are already doing the same.

We must also consider competitors response… :moneybag:is rarely simple.

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