Hurricanes Irma and Harvey sure crashed the housing party. Pending home sales fell for the third straight month in August by 2.6 percent to 106.3, according to the National Association of Realtors.
That’s the lowest level since January 2016.
The Index, which measures signed contracts, is a forward-looking indicator into housing activity. August’s reading is 2.6 percent lower than the same time last year.
Hurricanes did not help inventory problem
The damage from recent storms tanked contract signings in the South, in particular.
NAR expects existing sales to slump further as low inventory plagues many markets.
“August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,” says Lawrence Yun, NAR’s chief economist.
“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.”
The housing market has “essentially stalled,” Yun says.
NAR downgrades 2017 housing forecast
Housing had been enjoying strong momentum in 2016, but it’s been a bumpy ride this year.
So much so that NAR revised its forecast for home sales for 2017.
Yun now forecasts 5.44 million existing-home sales for 2017, which is 0.2 percent below 2016’s total of 5.45 million.
Also, the median existing-home sales price will likely be up 6 percent in 2017 over last year.
While disappointing, housing activity won’t be all doom-and-gloom for long.
“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,” Yun says.
Millennials overspending on homes
The affordability crunch is real for young home buyers.
About a third of young home buyers say they went over budget on a home purchase, according to the Zillow Group Report on Consumer Housing Trends 2017.
In contrast, 29 percent of all home buyers say they went over budget.
A lack of affordability and slow wage growth make it even harder for renters to make the leap to homeownership.
In fact, Zillow found that more than a third (37 percent) of renters who have stayed put in the past year say they simply can’t afford to move.
Renters might be stuck in place for the foreseeable future unless more starter-home options come up for sale.
Still, buyers shouldn’t give up
Despite the housing stall, motivated buyers can take advantage of the slower fall and winter months.
Typically, sellers want to close quickly and are willing to negotiate when buyer traffic slows. Also, price reductions tend to kick in the longer a listing sits on the market.
Another bonus: less competition.
Now, if you’re in a red-hot market, there are no promises. You’ll still see bidding wars and limited choices.
In less frenzied markets, though, there’s more wiggle room.
Mortgage rates are still low, and many lenders offer low down payment loans for borrowers with stable income and good credit.
A local real estate agent can help you devise offer strategies to catapult your bid to the top.
Keep in mind that sellers want to work with buyers who have few contingencies, solid financing and can close quickly.
What are today’s mortgage rates?
Today’s mortgage rates, while still low enough to be encouraging, have been creeping up. Current trends of rising rates and home prices should provide incentive to start a home search sooner rather than later.