Recently released data on the housing industry has been disappointing and does not bode well for the sector with sales remaining under pressure.
A report issued by the National Association of Realtors (“NAR”) in late September showed a sharp decline in pending home sales in the United States in the month of August. A sale is listed as pending when the contract has been signed but the deal is yet to close – this usually happens within a month or two of signing.
The NAR data shows that the Pending Home Sales Index declined to 106.3 in August, down 2.6% from July and the year-ago period. This is the fifth time in six months that pending home sales have declined.
Existing home sales also declined in August – according to the NAR, sales declined 1.7% from July with the South and the West recording sharp declines.
Then data released by the U.S. Census Bureau and the Department of Housing and Urban Development showed a sharp decline in new home sales as well. Sales of new single-family houses declined 3.4% sequentially in August 2017. Privately-owned housing starts also declined marginally (0.8%) in August.
The NAR now expects existing-home sales of around 5.44 million at year end, representing a slight decline from the 2016 level of 5.45 million (up 3.8%).
Low Supply Levels
The biggest issue being faced by the housing market is low supply. Inventory build-up is being impacted by factors like rising lumber and land costs as well as tight labor supply and shortage of land. Although demand remains strong, housing shortages, especially in certain areas, have been weighing on sales.
Impact of Hurricanes Harvey and Irma
Contract signings for August in the South were impacted by the damage caused by Hurricane Harvey in the Houston area. Moreover, sales in the South will be further affected by slower activity in Florida in the aftermath of Hurricane Irma. The impact of these two hurricanes will weigh on housing sales in the coming months as well.
