Housing red flag: Data show increase in cancellations of home purchase agreements versus a year ago – AP News

Report on U.S. Housing Market Trends and Sustainable Development Goals (SDGs) Implications

Overview of Current Housing Market Conditions

Recent data indicates increasing challenges in the U.S. housing market, highlighted by a rise in home purchase agreements falling through before finalization. According to the National Association of Realtors (NAR), 6% of pending home purchase contracts were canceled in May 2024, a slight decrease from 7% in April but an increase from 5% in May 2023. This marks the third consecutive month with an annual increase in cancellations.

Similarly, Redfin’s analysis reveals that 14.6% of all pending sales in May 2024 were canceled, up from 14% in May 2023. This represents the highest cancellation rate for May since at least 2017.

Factors Contributing to Increased Cancellations

• Unexpected costs associated with home purchases
• Changes in buyers’ credit, employment, or financial status
• Low property appraisals
• Stock market fluctuations
• Reduced consumer confidence
• Broader economic and geopolitical uncertainties

Lawrence Yun, Chief Economist at NAR, attributes these higher cancellation rates to the above factors, which collectively impact the stability and confidence of homebuyers.

Housing Market Performance and Economic Indicators

The U.S. housing market has been experiencing a sales slump since 2022, driven by elevated mortgage rates and rising home prices. These factors have pushed homeownership costs beyond the reach of many prospective buyers.

1. Sales of previously occupied homes in May 2024 remained at the slowest pace since 2009.
2. Pending home sales increased by 1.8% month-over-month and 1.1% year-over-year, according to NAR.
3. Redfin reported a 2.3% year-over-year decline in pending home sales for the four weeks ending June 22, 2024, marking the largest drop in three months.

Pending home sales, defined as contracts signed but not yet closed, serve as a leading indicator for future completed home sales, typically reflecting a one- to two-month lag.

Forecast and Outlook by Fannie Mae

Economists at Fannie Mae have revised their outlook for existing U.S. home sales, anticipating the average 30-year mortgage rate to end 2024 at 6.5%. Their updated forecast includes:

• A 2% increase in existing home sales in 2024, reaching 4.14 million units (down from a previous forecast of 4.24 million).
• An expected 9.5% rise in home sales in 2026, supported by a projected decrease in mortgage rates to 6.1%.

Emphasis on Sustainable Development Goals (SDGs)

SDG 11: Sustainable Cities and Communities

The challenges in the housing market directly impact SDG 11, which aims to make cities and human settlements inclusive, safe, resilient, and sustainable. The rising cost of homeownership and increased contract cancellations hinder access to affordable and adequate housing, a core target of this goal.

SDG 1: No Poverty

Housing affordability is closely linked to SDG 1, which seeks to end poverty in all its forms. Elevated mortgage rates and home prices exacerbate financial burdens on low- and middle-income families, potentially increasing housing insecurity and poverty levels.

SDG 8: Decent Work and Economic Growth

Economic uncertainties and employment changes affecting homebuyers relate to SDG 8, which promotes sustained, inclusive economic growth and productive employment. Fluctuations in employment status contribute to contract cancellations and market instability.

SDG 10: Reduced Inequalities

The housing market trends may widen inequalities, as affordability challenges disproportionately affect marginalized groups, counteracting SDG 10’s objective to reduce inequality within and among countries.

Recommendations for Policy and Stakeholders

1. Implement policies to stabilize mortgage rates and housing prices to improve affordability.
2. Enhance financial support and credit access for vulnerable homebuyers to reduce cancellations.
3. Promote economic stability and job security to support sustainable homeownership.
4. Encourage development of affordable housing projects aligned with SDG 11 targets.
5. Monitor housing market trends continuously to inform responsive policy interventions.

Addressing these challenges in the housing market is critical to advancing multiple Sustainable Development Goals and ensuring equitable access to safe and affordable housing for all.

1. Sustainable Development Goals (SDGs) Addressed or Connected to the Issues Highlighted in the Article

1. SDG 11: Sustainable Cities and Communities
   • The article discusses challenges in the U.S. housing market, including affordability and access to housing, which are central to SDG 11’s aim to make cities and human settlements inclusive, safe, resilient, and sustainable.
2. SDG 1: No Poverty
   • Housing affordability issues relate to poverty reduction efforts, as lack of affordable housing can contribute to economic hardship.
3. SDG 8: Decent Work and Economic Growth
   • The article references economic uncertainties, employment status changes, and consumer confidence, which connect to SDG 8’s focus on promoting sustained, inclusive economic growth and full employment.
4. SDG 10: Reduced Inequalities
   • Rising home prices and mortgage rates can exacerbate inequalities in access to housing, linking to SDG 10’s goal to reduce inequality within and among countries.

2. Specific Targets Under Those SDGs Identified Based on the Article’s Content

1. SDG 11: Sustainable Cities and Communities
   • Target 11.1: By 2030, ensure access for all to adequate, safe, and affordable housing and basic services and upgrade slums.
2. SDG 1: No Poverty
   • Target 1.4: By 2030, ensure that all men and women have equal rights to economic resources, including access to basic services, ownership, and control over land and property.
3. SDG 8: Decent Work and Economic Growth
   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, and encourage formalization and growth of micro-, small- and medium-sized enterprises.
   • Target 8.5: Achieve full and productive employment and decent work for all women and men by 2030.
4. SDG 10: Reduced Inequalities
   • Target 10.2: By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status.

3. Indicators Mentioned or Implied in the Article to Measure Progress Towards the Identified Targets

1. Housing Market Indicators
   • Percentage of pending home purchase agreements canceled (e.g., 6% in May, up from 5% last year) — measures stability and accessibility of housing market.
   • Number and rate of pending home sales and completed home sales — indicate housing market activity and affordability.
   • Mortgage interest rates (e.g., projected 6.5% average rate on 30-year mortgage) — affect affordability and access to housing finance.
   • Home prices nationally — rising prices indicate affordability challenges.
2. Economic and Employment Indicators
   • Changes in employment or financial status of homebuyers — implied as reasons for contract cancellations, reflecting economic stability.
   • Consumer confidence and stock market fluctuations — indirectly affect housing market dynamics and economic growth.

4. Table: SDGs, Targets and Indicators

Source: apnews.com