Signed contracts for previously owned homes fell sharply in September, an indication the rising cost of housing has sapped demand, according to a trade group.
The National Assn. of Realtors said Monday that its pending sales index fell 5.6% from a downwardly revised figure in August--the fourth consecutive monthly decline. Pending sales--which represent contracts signed, but not closed--reached the lowest level since December 2012.
“Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity,” the Realtors' chief economist Lawrence Yun said in a statement.
Home prices shot up rapidly this year, helping lift many from negative equity positions but also denting the ability of first-time home buyers to make a purchase. Mortgage rates have risen steadily since May, but have recently fallen back.
The lead up to the partial government shutdown in October also likely weighed on sales as consumers lost confidence and government employees and contractors remained “on the sidelines with growing insecurity over lawmakers’ inability to agree on a budget,” Yun said.
Pending sales were 1.2% below September 2012 levels --the first time sales failed to increase over the year in 29 months.
Sales declined in all regions from August. In the West, sales dropped 9.0% and are 9.8% below a year ago levels.