Home buyer dreams deferred: Aspiring owners put the brakes (mildly, at least) on the torrid pace of buying in January, according to the latest report on pending home sales. But one area in the U.S. still seems to be going stronger than ever: the South.
The number of houses across the nation under contract for sale (which hadn’t closed yet) dipped 2.5%, in January from December, but was still up 1.4% year over year, according to Monday’s report by the National Association of Realtors®. The report counted only existing homes, and not newly constructed residences.
“There’s several factors that have caused the slowdown, including the stock market decline and even the weather,” says Jonathan Smoke, chief economist of realtor.com®, alluding to Winter Storm Jonas. But “the biggest issue is the limited [number of] homes for sale. [Buyers] haven’t been able to find homes that meet their needs or their budgets.”
But he’s optimistic that the pace of homes going into contract will soon pick up again.
“The mortgage rate decline will more than offset the declines in the stock market,” Smoke says, noting that low rates yield more buying power for consumers. “We should see another year of growth, but not as much as last year because the [inadequate] supply of homes will limit that.”
NAR predicts that about 5.38 million existing homes will be sold in 2016, up 2.5% from last year. Meanwhile, the median price of those homes is expected to jump 4% to 5%. (Not such good news for home buyers, although it’s smaller than the 6.8% median price hike of 2015.)
And then there’s the Southeast—the only area in the country to actually see monthlygains, with pending home sales rising 0.3% from December to January. Why did it outperform the rest of the U.S.?
Jonas may be one factor, says Smoke. The blizzard brought much of the East Coast to a standstill (pending home sales in the Northeast dropped 3.2% from December), and had little or no impact south of Virginia.
In addition, “the South is still relatively affordable and has new job growth,” says Susan Wachter, a real estate and finance professor at the Wharton School of the University of Pennsylvania. “Both are positives for greater home sales.”
However, looking back to a year ago—which also saw epic storms—the Northeast recorded the largest gains of any region this January. The percentage of homes going into contract jumped 10.9% compared with January 2015, NAR reported.
The year-over-year jump proves that the Northeast is finally beginning to catch up to the rest of the country in terms of its housing recovery, Smoke says.
In the Midwest, pending sales were down 4.9% from December, but were up 1.4% year over year, according to the report. In the West, they dropped 4.5% from December, but rose 0.4% from the previous January.
Despite the monthly drops, real estate experts believe 2016 will be a strong year for home buyers entering into contracts.
“Wages are going up, employment is going up, which should position households better for buying,” predicts Wharton’s Wachter.