The National Association of Realtors (NAR) is blaming a lack of inventory on a report that pending home sales slipped 0.4% in February from the previous month. NAR’s Pending Home Sales Index still recorded an 8.4% increase over last February, however, and association analysts believe that only new construction will help alleviate the inventory shortage. Further, they argue that more transparent banking regulatory rules and better access to capital for small construction companies is needed to jumpstart building and help fuel the ongoing housing market recovery. For more on this continue reading the following article from Property Wire.
Pending home sales in the US flattened last month with limited buyer choices, but remained at the second highest level in nearly three years, according to the latest data from the National Association of Realtors.
The association’s Pending Home Sales Index, a forward looking indicator based on contract signings, slipped 0.4% to 104.8 in February from a downwardly revised 105.2 in January, but is 8.4% higher than February 2012 when it was 96.6.
NAR said that contract activity has been above year ago levels for the past 22 months and before January, the last time the index showed a higher reading was in April 2010 when it was 110.9, shortly before the deadline for the home buyer tax credit.
Lawrence Yun , NAR chief economist, said limited inventory is holding back the market in many areas.
‘Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50% from current levels,’ he explained.
‘Most local home builders are small businesses and simply don’t have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market,’ he added.
The PHSI in the Northeast declined 2.5% to 82.8 in February but is 6.8% above February 2012. In the Midwest the index rose 0.4% to 103.6 in February and is 13.2% higher than a year ago.
Pending home sales in the South slipped 0.3% to an index of 118.8 in February but are 12.1% above February 2012. In the West the index increased 0.1% to 101.4 but is 0.8 percent below a year ago.
Yun said that he predicts that existing home sales will rise about 7% in 2013 to approximately five million sales, which is near the current level of activity. ‘The volume of home sales appears to be levelling off with the constrained inventory conditions, and the levelling of the index means little change is likely in the pace of sales over the next couple months,’ he pointed out.
The national median existing home price is forecast to rise nearly 7% this year, while mortgage interest rates should remain historically low, but trend up slowly and reach 4% in the fourth quarter of 2013.
This article was republished with permission from Property Wire.