Pending home sales declined in September, although activity remains above a year ago, according to the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 4.6 percent to 84.5 in September from 88.6 in August, but is 6.4 percent higher than September 2010 when it stood at 79.4. The data reflects contracts but not closings.
Lawrence Yun, NAR chief economist, said the housing market is being excessively constrained. “A combination of weak consumer confidence and continuing tight lending criteria held back home buyers, even though the private sector added nearly 2 million net new jobs in the past 12 months,” he said.
Yun emphasized the need to reinstate higher loan limits in 42 states. “Just leaving excessive cash to sit in banks and not work into the economy is a drag on the overall recovery,” he said. “We need a comprehensive approach to address housing issues – not additional impediments.”
Additionally, the current state of the national economy continues to affect the remodeling industry, according to the latest National Association of Home Builders' (NAHB) Remodeling Market Index (RMI). The index dropped to 41.7 in the third quarter from 43.9 in the second quarter, after having reached a four-year high of 46.5 in the first quarter. An RMI below 50 indicates that more remodelers report that market activity is declining than report that it is increasing.
The overall RMI combines ratings of current remodeling activity with indicators of future activity, like calls for bids. In the third quarter, the RMI component measuring current market conditions fell to 43.0 from 44.8 in the previous quarter. The RMI component measuring future indicators of remodeling business declined as well, to 40.4 from 43.0 in the last quarter.
"Remodelers report that while many consumers show interest in having remodeling work done, they are slow to commit to projects," said NAHB Remodelers Chairman Bob Peterson, CGR, CAPS, CGP, a remodeler from Ft. Collins, Colo. "Consumers are in a 'wait and see' mode with regard to current economic conditions."
All three components measuring current market conditions decreased in the third quarter: major additions to 45.2 (from 46.2 in the second quarter), minor additions to 45.7 (from 48.5) and maintenance and repair to 37.1 (from 38.4). Future market indicators decreased as well: calls for bids to 45.4 (from 49.8), amount of work committed for the next three months to 29.9 (from 32.3), backlog of remodeling jobs to 43.0 (from 45.7) and appointments for appraisals to 43.3 (from 44.2).
Regionally, current remodeling market conditions shrank in two areas: the Northeast to 43.9 (from 48.1 in the second quarter) and the West to 40.9 (from 48.2). Increases were seen in the Midwest at 46.8 (from 44.4) and the South at 47.1 (from 42.9). Future market indicators fell in all regions, except for the South, where it edged up to 42.2 from 41.6 in the second quarter.
"The current economic instability continues to affect consumer confidence, therefore we have seen a drop off in remodeling activity for the last two quarters," said NAHB Chief Economist David Crowe. "In order for the remodeling market to pick up, home owners need to have access to less restrictive lending requirements and see their economic future stabilizing."