Key Indicator Down Again
The escrow industry is joined at the hip with the mortgage and real estate industries for most all home purchase or refinance transactions; thusly what happens in the latter two will impact us in the escrow business.
With that in mind seeing any indicator that the overall housing industry is slowing down may be reason for concern. According to the National Association of Realtors® Pending Home Sales Index (PHSI), pending home sales for existing homes were down again in October; this marks the fifth consecutive month for declines in the PHSI.
Why the possible concern? The PHSI is a forward-looking indicator based on signed contracts with the sale usually being closed or finalized within one or two months. As a leading indicator pending home sales can give a good prognosis of where the overall housing industry may be headed.
The PHSI slipped 0.6 percent to 102.1 in October from an upwardly revised 102.7 in September, and is 1.6 percent below October 2012 when it was 103.8. The NAR says the index is at its lowest level since December 2012 when it was 101.3.
NAR chief economist, Lawrence Yun, stated, “The government shutdown in the first half of last month sidelined some potential buyers. In a survey, 17 percent of Realtors® reported delays in October, mostly from waiting for IRS income verification for mortgage approval.”
Yun added that, “We could rebound a bit from this level, but still face the headwinds of limited inventory and falling affordability conditions. Job creation and a slight dialing down from current stringent mortgage underwriting standards going into 2014 can help offset the headwind factors.”
Yun was also cautionary in regards to the outlook for 2014 pointing out that new mortgage rules that are to go into effect in January could delay the approval process, also noting that another government shutdown would harm both housing and the economy.
On a positive note the NAR projects that annual existing-home sales will likely be nearly 10 percent higher this year than in 2012, totaling just above 5.1 million units sold, the NAR also expects a comparable volume in 2014.