A gauge of contract signings to purchase previously owned US homes unexpectedly declined for a second month in October as higher prices and a limited number of listings impeded momentum in the housing market.
The National Association of Realtors’ index of pending home sales decreased 1.1% to 128.9 from the prior month after a revised 2% decline in September, according to data released Monday. The October drop compared with a median estimate in a Bloomberg survey of economists for a 1% gain.
The decline underscores the challenges of further upward momentum in the housing market as the lack of available properties drives up asking prices and impedes demand. At the same time, contract signings are up almost 20% from a year ago on an unadjusted basis, highlighting the strides residential real estate has made amid record-low mortgage rates and buyer preferences for larger homes that double as office space.
“The housing market is still hot, but we may be starting to see rising home prices hurting affordability,” Lawrence Yun, chief economist at the NAR, said in a statement. The combination of low rates, lean inventory and “very strong demand has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers.”
By region, pending home sales declined in two of four major US regions, including a 5.9% decrease in the Northeast and a 0.7% drop in the Midwest. The gauge of contract signings in the South crept up 0.1%, while the index was unchanged for the West.
The government’s revised estimate of third-quarter gross domestic product highlighted the recent strength in housing. Residential investment jumped an annualized 62.3% pace, the fastest since 1983, Commerce Department data showed last week. GDP rose at a record 33.1% annualized rate during the period.