NAR: Limited Supply Causes Unexpected Drop in July Home Sales

The National Association of Realtors (NAR) reported a 0.8% drop in its pending home sales index for July, due to a persistently low level of supply in the US.

The unexpected decline further reflects the worsening situation of fewer homes listed for sale nationwide. The recent decrease also took place for the fourth time since April 2017.

Index Issues

The drop in pending home sales as shown by the NAR index indicated a slower pace of home-buying activities. Aside from this, a lower inventory also causes home prices to increase, while salary growth gets left behind. This excludes more buyers from the market due to unaffordable property values.

In July, the residential market recorded only 1.92 million existing properties for sale. This represented a 9% drop over the past 12 months. Given the numbers, the NAR revised its sales estimate for 2017 to 5.49 million from 5.56 million in June. Lawrence Yun, NAR’s chief economist, said that the current trend might lead to an estimated 5% increase in the national median existing-home price. This is similar to the 5.1% increase in 2016.

Short Supplies

For investors, buying homes may not be the best option right now due to the difficulty of selecting bankable properties. Instead, rental schemes could be a good alternative. These include Section 8 real estate investing offered by experts such as Americas Housing Alliance, LLC. Leasing rates have generally increased for multifamily properties compared with single-family homes.

On the other hand, a property sale serves as another option to liquidate your investment. However, you’ll need to consult with a real estate investment company first. They will determine the best strategy for selling.

Home sales serve as an economic growth indicator. As such, a shortage of homes on the market causes problems beyond high prices and affordability.