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While many home buyers are still eager, some may have taken a break from what’s been a red-hot, competitive housing market. The National Association of REALTORS®’ Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, decreased 2.3% in September from August, and pending home sales are down 8% compared to a year ago.
Still, NAR’s Pending Home Sales Index was at a 116.7 reading for September. An index reading of 100 is equal to the level of contract activity in 2001. Therefore, the housing market still remains on very solid ground.
“Contract transactions slowed a bit in September and are showing signs of a calmer home price trend, as the market is running comfortably ahead of pre-pandemic activity,” says Lawrence Yun, NAR’s chief economist. “It’s worth noting that there will be less inventory until the end of the year compared to the summer months, which happens nearly every year. Some potential buyers have momentarily paused their home search with intentions to resume in 2022.”
The number of homes for sale remains low. Yun expects inventory to turn a corner in 2022 as more listings to come onto the market. That could be welcome news to home buyers who, over the past year and a half, have encountered a historically low number of homes for sale.
An increase in housing inventory could also be a relief to renters. “Rents have been mounting solidly of late, with falling rental vacancy rates,” Yun says. “This could lead to more renters seeking homeownership in order to avoid the rising inflation, so an increase in inventory will be welcomed.”
Each of the four major U.S. regions saw contract activity decline month over month and year over year in September, NAR reports. The Northeast saw the largest yearly drop.
Housing Market Expectations for 2022
Even with limited housing inventory, housing has still posted strong sales this year. NAR forecasts home sales to rise by 6.4% for 2021. But due to higher anticipated mortgage rates—30-year rates are moving up from the sub-3% averages from earlier this year—NAR projects sales to decline by 1.7% in 2022 as some buyers get priced out.
NAR projects more tempered home prices in the new year. Home prices likely will moderate with a 2.8% growth in 2022, which would follow this year’s double-digit growth of 14.7%.