NAR: Pending Home Sales Retreat in August

After bouncing back in July, pending home sales cooled in August for the third time in four months and to their lowest level since January, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, declined 2.4 percent to 108.5 in August from a downwardly revised 111.2 in July and is now slightly lower (0.2 percent) than August 2015 (108.7). With last month's decline, the index is now at its second lowest reading this year after January (105.4).

According to Yun, evidence is piling up that without more new home construction the current housing recovery could stall. Housing inventory has declined year-over-year for 15 straight months; properties in August typically sold 11 days quicker than inAugust 20151 and after increasing 5.1 percent last month, existing-home prices have risen year-over-year for 54 consecutive months.Lawrence Yun, NAR chief economist, says suffering supply levels have taken the wind out of the momentum the housing market experienced earlier this year. "Contract activity slackened throughout the country in August except for in the Northeast, where higher inventory totals are giving home shoppers greater options and better success signing a contract," he said. "In most other areas, an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the miniscule number of affordable listings."

"There will be an expected seasonal decline in new listings in coming months, which could accelerate price appreciation and make finding an affordable home even more of a struggle for would-be buyers," added Yun.

Earlier this month, NAR released a new study that revealed single-family home construction is not keeping pace with job creation and is lacking overall in 80 percent of measured metro areas. When combined with the scant supply levels for existing homes, these tight inventory conditions continue to hamper affordability in many of the largest cities in the country – especially those in the West.

"Given the current conditions, there's not much room for sales to march again towards June's peak cyclical sales pace2," said Yun.

Following last month's decline, Yun expects existing-home sales in 2016 to be around 5.36 million, a 2.1 percent increase from 2015 and the highest annual pace since 2006 (6.48 million). The national median existing-home price growth is forecast this year to rise around 4 percent.

Regional Breakdown

The PHSI in the Northeast rose 1.3 percent to 98.1 in August, and is now 5.9 percent above a year ago. In the Midwest the index decreased 0.9 percent to 104.7 in August, and is now 1.7 percent lower than August 2015.

Pending home sales in the South declined 3.2 percent to an index of 119.8 in August and are now 1.5 percent lower than last August. The index in the West fell 5.3 percent in August to 102.8, and is now 0.6 percent lower than a year ago.

The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

1According to August's Realtors® Confidence Index data on typical days on market. 
2Existing-home sales in June were at a seasonally adjusted annualized sales rate of 5.57 million, the highest pace since February 2007 (5.79 million). 

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

Home Price Gains In July Slow According To The S&P CoreLogic Case-Shiller Indices

S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for July 2016 shows that home prices continued their rise across the country over the last 12 months. More than 27 years of history for these data series is available, and can be accessed in full by going to www.homeprice.spdji.com. Additional content on the housing market can also be found on S&P Dow Jones Indices' housing blog: www.housingviews.com.

YEAR-OVER-YEAR
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1% annual gain in July, up from 5.0% last month. The 10-City Composite posted a 4.2% annual increase, down from 4.3% the previous month. The 20-City Composite reported a year-over-year gain of 5.0%, down from 5.1% in June.


Portland, Seattle, and Denver reported the highest year-over-year gains among the 20 cities over each of the last six months. In July, Portland led the way with a 12.4% year-over-year price increase, followed by Seattle at 11.2%, and Denver with a 9.4% increase. Nine cities reported greater price increases in the year ending July 2016 versus the year ending June 2016.

MONTH-OVER-MONTH
Before seasonal adjustment, the National Index posted a month-over-month gain of 0.7% in July. The 10-City Composite recorded a 0.5% month-over-month increase while the 20-City Composite posted a 0.6% increase in July. After seasonal adjustment, the National Index recorded a 0.4% month-over-month increase, the 10-City Composite posted a 0.1% decrease, and the 20-City Composite remains unchanged. After seasonal adjustment, 12 cities saw prices rise, two cities were unchanged, and six cities experienced negative monthly prices changes.

ANALYSIS
"Both the housing sector and the economy continue to expand with home prices continuing to rise at about a 5% annual rate," says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. "The statement issued last week by the Fed after its policy meeting confirms the central bank's view that the economy will see further gains. Most analysts now expect the Fed to raise interest rates in December. After such Fed action, mortgage rates would still be at historically low levels and would not be a major negative for house prices,

"The S&P CoreLogic Case-Shiller National Index is within 0.6% of the record high set in July 2006. Seven of the 20 cities have already set new record highs. The 10-year, 20-year, and National indices have been rising at about 5% per year over the last 24 months. Eight of the cities are seeing prices up 6% or more in the last year. Given that the overall inflation is a bit below 2%, the pace is probably not sustainable over the long term. The run-up to the financial crisis was marked with both rising home prices and rapid growth in mortgage debt. Currently, outstanding mortgage debt on one-to-four family homes is 12.6% below the peak seen in the first quarter of 2008 and up less than 2% in the last four quarters. There is no reason to fear that another massive collapse is around the corner."

SUPPORTING DATA
Table 1 below shows the housing boom/bust peaks and troughs for the three composites along with the current levels and percentage changes from the peaks and troughs.

2006 Peak		2012 Trough			Current
Index	Level	Date	Level	Date	From Peak  (%)	Level	From  Trough (%)	From  Peak (%)
National	184.62	Jul-06	134.01	Feb-12	-27.4%	183.57	37.0%	-0.6%
20-City	206.52	Jul-06	134.07	Mar-12	-35.1%	190.91	42.4%	-7.6%
10-City	226.29	Jun-06	146.45	Mar-12	-35.3%	204.92	39.9%	-9.4%

Table 2 below summarizes the results for July 2016. The S&P CoreLogic Case-Shiller Indices are revised for the prior 24 months, based on the receipt of additional source data.

	July 2016	July/June	June/May	1-Year
Metropolitan Area	Level	Change (%)	Change (%)	Change (%)
Atlanta	132.49	0.4%	0.8%	5.3%
Boston	191.58	0.6%	0.5%	4.2%
Charlotte	141.60	0.4%	0.8%	5.3%
Chicago	137.65	0.9%	1.2%	3.7%
Cleveland	112.78	0.5%	1.4%	2.5%
Dallas	166.32	0.7%	0.9%	8.3%
Denver	187.42	0.9%	1.1%	9.4%
Detroit	108.81	0.8%	1.4%	5.3%
Las Vegas	152.18	0.5%	0.7%	5.4%
Los Angeles	251.17	0.6%	0.7%	5.5%
Miami	215.41	0.4%	0.7%	7.0%
Minneapolis	154.40	0.6%	1.1%	5.0%
New York	183.90	0.6%	0.8%	1.7%
Phoenix	161.94	0.8%	0.7%	5.2%
Portland	207.46	1.2%	1.6%	12.4%
San Diego	227.53	0.6%	0.4%	6.0%
San Francisco	228.42	0.0%	0.4%	6.0%
Seattle	203.70	0.6%	1.4%	11.2%
Tampa	184.47	0.7%	0.5%	7.8%
Washington	217.28	0.4%	0.7%	2.0%
Composite-10	204.92	0.5%	0.7%	4.2%
Composite-20	190.91	0.6%	0.8%	5.0%
U.S. National	183.57	0.7%	0.9%	5.1%
Sources: S&P Dow Jones Indices and CoreLogic
Data through July 2016

Table 3 below shows a summary of the monthly changes using the seasonally adjusted (SA) and non-seasonally adjusted (NSA) data. Since its launch in early 2006, the S&P CoreLogic Case-Shiller Indices have published, and the markets have followed and reported on, the non-seasonally adjusted data set used in the headline indices. For analytical purposes, S&P Dow Jones Indices publishes a seasonally adjusted data set covered in the headline indices, as well as for the 17 of 20 markets with tiered price indices and the five condo markets that are tracked.

	July/June Change (%)		June/May Change (%)
Metropolitan Area	NSA	SA	NSA	SA
Atlanta	0.4%	-0.3%	0.8%	-0.6%
Boston	0.6%	0.0%	0.5%	-0.4%
Charlotte	0.4%	0.3%	0.8%	0.3%
Chicago	0.9%	-0.5%	1.2%	-0.6%
Cleveland	0.5%	0.2%	1.4%	0.0%
Dallas	0.7%	0.3%	0.9%	0.2%
Denver	0.9%	0.5%	1.1%	0.3%
Detroit	0.8%	-0.3%	1.4%	-0.3%
Las Vegas	0.5%	0.1%	0.7%	0.2%
Los Angeles	0.6%	0.2%	0.7%	0.1%
Miami	0.4%	0.2%	0.7%	0.6%
Minneapolis	0.6%	-0.3%	1.1%	-0.2%
New York	0.6%	-0.4%	0.8%	-0.5%
Phoenix	0.8%	0.5%	0.7%	0.2%
Portland	1.2%	0.7%	1.6%	0.7%
San Diego	0.6%	0.1%	0.4%	0.1%
San Francisco	0.0%	-0.1%	0.4%	-0.2%
Seattle	0.6%	0.3%	1.4%	0.5%
Tampa	0.7%	0.2%	0.5%	-0.1%
Washington	0.4%	0.0%	0.7%	0.0%
Composite-10	0.5%	-0.1%	0.7%	-0.2%
Composite-20	0.6%	0.0%	0.8%	-0.1%
U.S. National	0.7%	0.4%	0.9%	0.2%
Sources: S&P Dow Jones Indices and CoreLogic
Data through July 2016