As summer came to an end, the months of high home sales began to decrease. While the first half of 2015 saw a strong housing market, it
began to decline in August, according to a press release from the National Association of Realtors.
The Pending Home Sales Index went down from 110.9 in July to 109.4 in August. However, the PHSI still represents an improvement from August 2014, when it was 103.1. This is a good sign for the housing market.
Lawrence Yun, NAR's chief economist, explained that rising home prices and low supply of available homes greatly contribute to the decline. He also foresees the implementation of the TILA-RESPA Integrated Disclosure, a restructuring of the mortgage process, to have an effect on upcoming months' PHSI. TRID went into effect on October 3.
Though the drop in home sales wasn't what many real estate professional expected, some economists don't think it will last long, according to the Wall Street Journal.
"While the report is a negative development, mortgage applications are on an upward trend while supply is tighter—both suggest the drop in pending home sales will be short-lived," Bricklin Dwyer, a senior economist with BNP Paribas, told his clients.
Home Building Is Up
Although low housing inventory has contributed to the decline in signed contracts, construction has picked up, which will bring the inventory up in the upcoming months. July experienced the most housing starts since the end of 2007 with 1.21 million homes, according to the New York Times.
In August, the National Association of Home Builders reported the highest homebuilder confidence level since November of 2005. These facts show promise for the housing supply in the upcoming months, though Tom Woods, NAHB chairman explained that there are still obstacles to overcome.
"The fact the builder confidence has been in the low 60s for three straight months shows that single-family housing is making slow but steady progress," Woods said in the release. "However, we continue to hear that builders face difficulties accessing land and labor."
The new construction is being noticed by homebuyers. According to the U.S. Census Bureau, new home sales rose to 552,000 in August, up 30,000 from July. Compared to last August's total of 454,000, this is a big improvement.
According to the Wall Street Journal, new home sales make up one-tenth of the market. Homebuilders see the increase of new home sales as a good sign the housing market is on the right track. Many have seen increases in orders in the past few months. Stuart Miller, CEO of Lennar Corp, a homebuilder in 17 states, reported a 10 percent increase in home orders in its third fiscal quarter.
"Our results reflect the slow but steady growth in the overall home-building market," Miller explained to his investors on a conference call. "This year's summer season, and the spring selling season before it, confirm that the market is continuing to improve at a fairly consistent pace."