In addition to a bitterly cold winter sweeping much of the nation, low inventory levels and higher home prices continue to cause issues for the housing market. Pending home sales in the United States remained at their worst level in more than two years.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, edged only 0.1 percent to 95.0 in January from an upwardly revised 94.9 in December, according to the latest report from National Association of Realtors. On average, economists expected sales to increase by about 2 percent. It was the lowest reading for the index since November 2011 and 9 percent below from a year earlier.
Weather conditions were mentioned for the weak sales report, but other factors are also at play. “Ongoing disruptive weather patterns in much of the U.S. inhibited home shopping,” said Lawrence Yun, NAR Chief Economist, in a press release. “Limited inventory also is playing a role, especially in the West, while credit remains tight and affordability isn’t as favorable as it was a year ago.”
Home prices have been experiencing double-digit percentage gains on a year-over-year basis in many parts of the country while wages grew only 1.8 percent last year. Pending home sales in the Midwest and West declined 2.5 percent and 4.8 percent, respectively. Sales in the Northeast escaped the cold weather with an increase of 2.3 percent. The South, which also suffered harsh weather conditions, posted a 3.5 percent gain in pending home sales.
The National Association of Realtors expects total existing-home sales this year to total around 5 million units, which is slightly below the volume recorded last year. Meanwhile, the national median existing-home price is expected to rise at a more reasonable range of 5 to 6 percent in 2014 and grow another 4 percent in 2015.
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