Pending Home Sales Jump to New Seven-Month High

New data from the National Association of Realtors (NAR) recently revealed that the pending home sales in the United States have jumped to a new seven-month high. This data means that contracts to purchase previously owned homes have risen yet again. Contracts have risen in all four regions of the United States, even as loan applications for home purchases fall. Even though Americans are still interested in buying homes, many concerns linger that could continue to negatively impact the housing market as a whole.

According to new NAR data, pending home sales increased by about 8.1% in August to a reading of 119.5. This latest reading follows two straight monthly declines. Meanwhile, a reading hasn’t been this high in the Pending Home Sales Index since earlier this January. However, when compared to a year ago, pending home sales have fallen about 8.3%.

While this data does signal that consumers are still interested in buying previously owned homes, other data hints that trouble could be coming for the housing market. Consumer sentiment has dropped again when it comes to consumers wanting to buy a new home, for a third straight month. Plus, raw material shortages have caused new homes — and all homes on the market — to rise in price because of the low inventory of homes on the market. As a result of these high prices, many first-time homebuyers are essentially being shut out. 

However, there are signs that this inventory shortage of homes on the housing market could be coming to an end in the next few months. For example, lumber prices have finally plummeted in price after previously hitting record highs in May when the entire world was stuck in a lumber shortage. Now that lumber is not as costly as before, many economists believe that this will help lower prices of homes, as well as help homebuilders continue to construct new houses. Now that the government has not renewed the moratorium on foreclosures, this may also cause more homes to be put up for sale. 

While there might be more houses to go around on the market, it does appear as if high prices will likely continue, at least for the near future. This could continue to affect affordability — and this may also continue to keep first-time homebuyers shut out.

The housing market is also continuing to be impacted by the labor shortage gripping the nation. Many home builders that construct new homes for buyers have been forced to slow down and not take as many projects on, as they don’t have enough workers to accurately get the job done in a reasonable time frame. As more workers return to the workforce — which is what many economists are hopeful for — this issue could cease to be a problem.   

Raw material shortages have, meanwhile, somewhat gone down. Lumber is no longer incredibly expensive. However, other material shortages have persisted, which has kept home builders from quickly constructing homes, per usual. Once these massive shortages are worked out, homebuilders should have an easier time with completing new home constructions for buyers.