Nov. 30 (UPI) -- Pending sales in the U.S. housing market declined slightly for a second consecutive month in October, signaling buyers may be reaching a limit on what they can afford, updated data showed Monday.
The Pending Home Sales Index, which analyzes home sales based on contract signings, fell 1.1% to 128.9 in October after dipping 2.2% the previous month, the National Association of Realtors said.
An index of 100 is equal to the level of contract activity in 2001.
Despite the recent slowdown, homebuying activity remained more than 20% higher than October 2019, spurred by continuing strong demand from first-time buyers and historic lows for both mortgage rates and the supply of homes for sale.
"Pending home transactions saw a small drop-off from the prior month but still easily outperformed last year's numbers for October," said Lawrence Yun, NAR's chief economist. "The housing market is still hot, but we may be starting to see rising home prices hurting affordability."
The scarce supply, low rates and strong demand "has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers, who don't have the luxury of using housing equity from a sale to use as a down payment," Yun said.
Demand is also being boosted by more people working from home during the coronavirus pandemic, he added.
Those supply-and-demand factors have pushed home value growth to levels not seen since 2005, according to online mortgage broker Zillow.
Home values rose 1% to $262,604 in October -- the largest monthly increase in 15 years, the analysts found in a report released Monday.
"The red-hot housing market of this summer and fall is now clearly reflected in soaring home value appreciation," said Zillow senior economist Jeff Tucker. "We haven't seen such steep, short-term appreciation since the summer of 2005," he said -- but with a crucial difference.
Fifteen years ago during the run-up to the 2008 financial crisis, the appreciation boom was fueled by "a wave of poorly-vetted, exotic mortgages," while this time it is driven by "millions of well-qualified millennials" with strong credit and incomes who are securing affordable fixed-rate mortgages.