Pending home sales decline, investor activity picks up

Pending home sales decline in September while investor activity heads in the other direction.

Throughout September and October, the U.S. housing market has been full of ups and downs. The fluctuations certainly make the segment interesting for real estate agents, investors and other professionals keeping a close eye on conditions.

For instance, mortgage rates began a slow climb not too long ago, and then shortly after dipped lower once again despite constantly being near historic lows. In early October, the U.S. government entered a partial government shutdown which put a number of economic statistics into question. 

Thankfully at the moment, things appear to have leveled out. However, higher rates and home prices have changed several key elements of the housing market.

Pending home sales decline once more
September marked the fourth consecutive month in which pending home sales dropped, according to data from the National Association of Realtors. This is most likely due to several factors, such as interest rates and more expensive properties. 

In total, NAR's Pending Home Sales Index decreased 5.6 percent for the month, down to 101.6 from August's figure. That is also more than 1 percent lower than September 2012, and the lowest reading since December of that year.

The PHSI represents current contract signings, and is intended to provide foresight into the near future of the housing market. Lawrence Yun, NAR chief economist, pointed to the budget impasse in Washington, D.C., as one reason why the reading dropped.

"Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity," Yun said. "In addition, government and contract workers were on the sidelines with growing insecurity over lawmakers' inability to agree on a budget. A broader hit on consumer confidence from general uncertainty also curbs major expenditures such as home purchases."

He added that the current data may indicate fewer home sales throughout the fourth quarter.

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Investor activity on the rise
Even while the signs point to slower sales for the end of 2013, real estate investors appear to be buying up properties at a strong pace.

According to data from RealtyTrac, the housing market has been favorable to investors as of late, while traditional buyers have moved to the sidelines in some areas. More foreclosed houses and other bank owned properties may have helped drive up the numbers.

Overall, distressed sales made up 25 percent of September's total sales, RealtyTrac reported. On a yearly basis, that is 7 percent higher.

"Distressed sales remain persistently high, particularly short sales," said Daren Blomquist, vice president at RealtyTrac. "Markets with the biggest increases in short sales tend to be those where either foreclosure starts or scheduled foreclosure auctions have rebounded in the last 18 months - translating into more motivated short sellers - or those with a still-high percentage of underwater homeowners with negative equity."

Despite the decline in pending home sales, buyer activity and interest is still present in many markets across the U.S. As investing heats up, there could be a number of opportunities out there.

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