The National Association of Realtors’ leading indicator of future home sales fell for the fifth straight month in October to the lowest level since last December as the government shutdown slowed loan processing.
“The government shutdown in the first half of last month sidelined some potential buyers. In a survey, 17% of Realtors reported delays in October, mostly from waiting for IRS income verification for mortgage approval,” says NAR chief economist Lawrence Yun.
The NAR’s pending sales index fell to 102 in October, down 0.6% from the prior month. Overall, the index is down 1.6% from October 2012.
The Realtors also cited limited inventory, rising home prices and higher mortgage rates for the slowdown in pending
Meanwhile, the NAR is concerned that recent hikes in flood insurance premiums will be a drag on sales going forward. Due to the Biggert-Waters flood insurance reform bill of 2012, many potential buyers are finding they can no longer get the sellers’ subsidized flood insurance rate. They have to pay the full-risk premium in a lump sum at closing. This is causing sticker shock for some buyers, particularly in coastal areas.
The premium hikes can be having some “minor impact” at this point, but it is not as obvious as the government shutdown and other factors, according to NAR spokesman Walter Molony. Going forward, it may become more of a factor in terms of buyers balking at paying thousands of dollars or more in annual flood insurance premiums.
