Pending home sales inched up in October after two consecutive months of declines, according to data from the National Association of Realtors.
The association’s pending home sales index, which is based on contract signings, rose 0.2 percent last month to 107.7 from 107.5 in September, but fell from 109.3 in August.
On a year-over-year basis, however, the index is 3.9 percent above the October 2014 level of 103.7.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year examined by the association.
Nationally, month-over-month gains in the Northeast and West were offset by declines in the Midwest and South. Pending sales in the Northeast rose 4.5 percent in October from September, and were up 1.7 percent in the West. In the Midwest, contract signings were down 1 percent, and in the South decreased by 1.7 percent.
In the Charlotte-Concord-Gastonia area, pending home sales dipped 2.9 percent to 3,562 last month from 3,669 in September. On an annual basis, pending sales rose a substantial 21 percent from 2,940 signed contracts in October 2014, according to the Charlotte Regional Realtor Association.
National Association of Realtors Chief Economist Lawrence Yun says a meager supply of homes on the market and rising prices have caused pending sales to plateau recently.
“Contract signings in October made the most strides in the Northeast, which hasn’t seen much of the drastic price appreciation and supply constraints that are occurring in other parts of the country,” he said in a press release. “In the most competitive metro areas – particularly those in the South and West – affordability concerns remain heightened as low inventory continues to drive up prices.”
Inventory hit a new low in the Charlotte area last month, equal to just a 3.6-month supply. According to the CRRA, that was a drop from a 3.7-month supply in September.
A six-month supply of homes on the market is considered to be balanced, where neither buyer nor seller has the upper hand in negotiations.
Several factors can cause low inventory, including prospective sellers waiting for prices to rise sufficiently to recoup equity lost during the housing crisis. Low interest rates make refinancing existing mortgages attractive, while stagnant real wages and student loan debt have made it more difficult to save for a down payment on a new home.
Nationally, inventory was at a 4.8-month supply in October, up from 4.7 months in September. The median home sales price was $219,600 in October, a 5.8 percent annual increase.
In the Charlotte region, the median sales price in October was $185,000, up 3.9 percent from the previous year and 6.5 percent year to date, but down 2.6 percent from September.
Although pending contract activity has trended downward since the spring, Yun said the ongoing strengthening of several U.S. job markets continues to fuel improved demand that has pushed monthly existing-sales above a 5 million annualized pace for eight consecutive months.
On an annual basis, sales were up 3.9 percent from October 2014. They fell, however, 3.4 percent last month to a seasonally adjusted annual rate of 5.36 million from 5.55 million in September.
In the Charlotte area, purchases fell 10.6 percent in October to 3,073 transactions from 3,436 in September. Sales declined 3.9 percent from 3,198 in October 2014.
CRRA President Maren Brisson-Kuester said earlier this month that the drop in sales was “not alarming,” and was caused by a traditional slowdown that occurs at the end of each year and inclement weather in October that kept prospective buyers from looking.
Sales were stronger in October 2014, she said, because there was more pent-up buyer demand and widespread fears that the Federal Reserve would raise interest rates, making mortgages more expensive.
Yun, meanwhile, says ongoing inventory shortages and affordability pressures will likely temper national sales growth to around 3 percent next year, with home-price appreciation moderating to 5 percent next year from 6 percent in 2015.
“Unless sizeable supply gains occur for new and existing homes, prices and rents will continue to exceed wages into next year and hamstring a large pool of potential buyers trying to buy a home,” he said.
The National Association of Realtors is a trade association that represents 1 million members in commercial and residential real estate.