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Contract Signings Slip as Tight Inventory Pushes Buyers Away

JAN 28, 2013 10:46am ET
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The National Association of Realtors’ leading indicator of future existing-home sales fell 4.3% in December after a four-month updraft.

The new report on contract signings issued Monday morning suggests there are plenty of buyers, but sales are being restrained by the limited number of homes on the market.

“The supply limitation appears to be the main factor holding back contract signings in the past month,” said NAR chief economist Lawrence Yun.

“Buyer interest remains solid, as evidenced by a separate Realtor survey which shows that buyer foot traffic is easily outpacing seller traffic,” he added.

NAR’s pending sales index is based on signed contracts, which usually translates into actual sales in a month or two.

The index hit a two-and-a-half-year high in November and it is up 7% from December 2011.

The trade group is looking ahead for another good year with sales rising 9% in 2013.

“We expect a seasonal rise of inventory in the spring to help, but a seller’s market may be developing,” Yun warned.

Existing-home sales bottomed out in 2010 at 4.19 million and rose to 4.26 million in 2011. NAR economists estimate sales totaled 4.65 million in 2012 and will hit 5.07 million by the end of this year.

The pending sales index fell to 101.7 in December from 106.3 in November. The contract signing rose 1% in the Midwest, while falling 5.4% in the Northeast, 4.5% in the South and 8.2% in the West.

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