In June and July, pending home sales started to decline. Pending home sales represent contracts signed to buy existing homes, and when those sales start to drop, it’s a sign that demand for homes is starting to drop. Buyers may have been encouraged by these initial summer numbers, as a downturn in the housing market could push down inflated home prices.
But the National Association of Realtors reports that in August, pending home sales rose 8.1% from the previous month. That’s well beyond the 1% increase that experts were predicting. It also means that the housing market could stay warm for a while, which is great news for sellers, but not so much for buyers.
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Not the best time to buy
Many buyers were hoping that demand for existing homes would start to decline as 2021 dragged on. But the August numbers tell us that doesn’t seem to be happening. In fact, based on this surge in pending home sales, it’s fair to say that buyers who have struggled to buy a home this year are likely to continue to do so in the short term.
In July, house prices rose 19.2% from the previous year, according to the latest house price index from the Federal Housing Finance Agency. And that means today’s buyers have to make larger down payments and take out larger mortgages to buy their own homes.
One of the main reasons home prices are so high is that real estate inventories have been extremely low throughout the year. Although inventories edged up over the summer, the housing market is still short of the more than 5 million units it needs to meet buyer demand. All in all, those trying to buy a home before the end of 2021 may face their fair share of difficulties.
That said, it’s hard to say when the building stock will open. But once a stronger supply of properties hits the market, home prices should start to drop, allowing more buyers to be successful.
Sellers may delay listing their homes because they want to weather the pandemic before they move. If things improve when it comes to COVID, the housing market could open up in 2022, so those who are willing to sit until then may have better luck.
What about mortgage rates?
One of the main reasons there is so much demand to buy a home today is that mortgage rates are at very competitive levels, so buyers are willing to ignore the fact that property values are so high. high. But those rates are also likely to stay low for a while, so buyers who put their home search on hold shouldn’t worry about missing the chance to lock in an affordable mortgage.
Right now there is only tons of demand for housing and not enough supply to meet it. And until things balance out, those looking to buy are likely to face their fair share of challenges.