It has been reported today by the National Association of Realtors that the Pending Home Sales Index (PHSI), which measures housing contract activity, has decreased by 0.6% based on data from September to October of this year. Based on contract signings for single-family homes, condos, and co-ops, the index decreased from 102.7 in September to 102.1 in October.
The NAR’s chief economist, Lawrence Yun, stated that the weaker activity was predictable as a result of the concurrent government shutdown. Yun cited a recent survey of Realtors to support this, “17 percent of Realtors reported delays in October, mostly waiting for IRS income verification for mortgage approval.”
Yun stated further concern for home sales in the coming year, stressing the importance of job creation and the easing of underwriting guidelines to increasing home sales.
According to financial data firm Markit’s Purchasing Managers Index, increases in productivity and business from October to November are being witnessed throughout the manufacturing and service sectors. While this is a good indication that business is growing, this news is tempered by the fact that the rate of new hires has decelerated from October to November. This is in part being fueled by continuing concerns over the debt ceiling.
As far as underwriting guidelines are concerned, the Qualified Mortgage Rule, set to take effect in January, will increase rather than decrease the scrutiny applied to loan applications. As Yun said, “New mortgage rules in January could delay the approval process.”
In light of a limited inventory and increasingly stringent guidelines, it is not atypical of the fall, shutdown or no shutdown, for home sales to decline, and in spite of recent market trends, there are advantages to fall purchases for the savvy buyer, even with the advent of the Qualified Mortgage Rule.
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