Pending home sales plunged 5.6% month-over-month in September.
This missed expectations for the index to stay flat. Meanwhile, August’s number was unchanged showed a 1.6% fall.
Year-over-year the index was up 1.1%, compared with a 2.8% rise in August.
This was the first time in 29 months that pending home sales weren’t above year ago levels.
“Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity,” said Lawrence Yun, chief economist at the National Association of Realtors in a press release.
“In addition, government and contract workers were on the sidelines with growing insecurity over lawmakers’ inability to agree on a budget. A broader hit on consumer confidence from general uncertainty also curbs major expenditures such as home purchases.”
Here’s a look at the regional breakdown:
In the Northeast, the pending home sales index (PHSI) fell 9.6% on the month, and is down 6.4% from a year ago.
In the Midwest, the index is down 8.3% on the month, but up 5.7% from a year ago.
In the South, the index fell 0.4% on the month, but is up 2.0% from a year ago.
In the West, it is down 9.0% on the month, and is down 9.8% from a year ago.
The PHSI looks at all homes where a contract has been signed but the sale is not complete. Investors watch this number because it is considered a leading indicator of the housing market.
The Commerce Department calculates that 80% of signings will become existing home sales transactions within two months,” points out Andrew Wilkinson of Miller Tabak in a note to clients. So this is likely to weigh on the existing sales numbers down the line.
Here’s a look at the trajectory of the pending home sales index: