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In June and July, pending home sales began to decline. Pending home sales represent signed contracts to purchase existing homes, and when those sales start to fall, it's a sign that the demand for homes is starting to decline. Buyers may have been encouraged by those initial summertime numbers because a housing market cool-off could bring inflated home prices down.
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 experts were anticipating. It also means that the housing market could stay hot for quite some time, which is great news for sellers -- but for buyers, not so much.
Not the best time to buy
Many buyers were hoping that the demand for existing homes would start to wane as 2021 dragged on. But August's numbers tell us that doesn't seem to be happening. In fact, based on that uptick in pending home sales, it's fair to say that buyers who have struggled to purchase a home this year will probably continue to do so in the near term.
In July, home prices were up a whopping 19.2% from the previous year, according to the latest Federal Housing Finance Agency House Price Index. And that means that today's buyers have to make larger down payments and take on higher mortgages to swing homes of their own.
A big reason why home prices are so high is that real estate inventory has been extremely limited all year. While inventory did rise slightly over the summer, the housing market is still lacking the more than 5 million homes it needs to meet buyer demand. All told, those who try to buy a home before 2021 ends may encounter their share of difficulties.
That said, it's hard to say when housing inventory will open up. But once a more robust supply of properties hits the market, home prices should start to fall, making it possible for more buyers to have success.
It could be that sellers are holding off on listing their homes because they want to ride out the pandemic before moving. If things improve in regards to COVID, the housing market could open up in 2022, so those who are willing to sit tight until then may have better luck.
What about mortgage rates?
A big reason why there's so much demand to buy a home today is that mortgage rates are sitting at very competitive levels, so buyers are willing to overlook the fact that property values are so high. But those rates are also likely to stay low for quite some time, so buyers who pause their house hunting shouldn't worry that they're missing out on the chance to lock in an affordable mortgage.
Right now, there's just tons of demand for homes and not enough supply to meet it. And until things equalize, those looking to buy are apt to face their fair share of challenges.
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