The Home Buyer's Korner

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November 2nd, 2015

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Pending Home Sales for September 2015

Homes Sales

We saw a decline in the National Association of Realtors index for Pending Home Sales and many analysts see it as a sign of a troubled housing market. The number of previously owned homes that went under contract across the U.S. fell last month. The pending home sales index measure purchases before they become final and declined 2.3 percent to a seasonally adjusted reading of 106.8 in September. That marked the second-lowest level of the year and the second consecutive monthly drop! Economists surveyed before the reading had predicted a 1 percent rise in September sales.

The National Association of Realtors, attributed the latest decline to a shortage of home listings. Current inventory stands at 4.8 months and a balance supply of home for sale is 6 months. Some cities like Denver only have a 1 month supply at best! Where the housing shortage is being felt the most is at the lower end of the market, where home builders have focused the least over the past few years, creating a real shortage of affordable housing across America.

Instability in global markets seen at the end of the summer, signs of a slowing U.S. economy, and a very limited supply of starter homes are surely causing many would-be home buyers to take a wait-and-see approach and staying put in many newly created rental units and that only helps the 1 percent and not Main Street. When you rent, you’re helping your landlord create equity and neglecting your own wealth building. 

Despite the latest softness, the housing market could be much stronger on the back of low interest rates and what has been an expanding labor market, but our plutocrats in Hollywood East have been more concerned with fluff and political points rather than focusing on the hard problems like stagnant wages and an ever higher increasing U.S. dollar.

Pending sales were up 3 percent in September compared with a year earlier, but if our plutocrats in Hollywood East don’t address the harder problems their positions were created for, the problems at hand for Main Street are surely going to eat away at all the gain Main Street has worked hard to rebuild, after Wall Street and their political cronies wrecked our economy not so long ago.

Pending sales are a bellwether of the housing market, since it measures transactions early in the home buying process. However, many contracts never reach “closing,” and the gauge isn’t as closely followed as the National Association of Realtors existing-home sales report that reflects final purchases.

Existing-home sales reflect about 90 percent of all purchases and increased 4.7 percent for August, which was near its post-recession high. However, intermittent signs are surfacing of a slowdown this fall in the new-home market.

On Monday, data released by the Commerce Department showed that the pace of new-home sales in September marked an 11.5 percent decline for August and a tepid year over year gain of just 2 percent. Furthermore, in the Northeast new home sales for August dropped an incredible 61.8 percent.

To be sure, builders have posted mixed results for the third quarter. It’s taking home buyers longer to make a decision. There is obviously more competition with an improving market, but there is also enough negative static out there that people just aren’t jumping out to buy right now.

Some factors affect the new-home market are the same as with existing homes. For example, buyers of either type of home might be influenced by recent reports of a slowing U.S. economy. Low oil prices are beginning to have a negative effect on our economy as well. We are seeing a slowdown in Houston’s busy housing market because of depressed oil prices, and this stands to affect national results for both new homes and resales.

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