Buyers in the West drive home sales up 1.5% in September

There may be fewer and fewer homes for sale, but where they are flying off the shelves is out West.

A monthly index measuring signed contracts to purchase a home rose 1.5 percent monthly in September, according to the National Association of Realtors (NAR). August's reading, which already showed a decline, was revised down further. These so-called "pending" home sales are now 2.4 percent higher than September of 2015.

"Buyer demand is holding up impressively well this fall with Realtors reporting much stronger foot traffic compared to a year ago," noted Lawrence Yun, NAR's chief economist in a release. "Although depressed inventory levels are keeping home prices elevated in most of the country, steady job gains and growing evidence that wages are finally starting to tick up are encouraging more households to consider buying a home."

Sales were mixed regionally, with the Northeast showing a 1.6 percent decline in signed contracts, although they are 7.7 percent above a year ago. In the Midwest the index declined 0.2 percent monthly and is now 1.0 percent lower than September, 2015. Pending home sales in the South rose 1.9 percent monthly and 1.7 percent annually, and the West jumped 4.7 percent monthly and 4.0 percent annually. While states in the West have some of the lowest inventory in the nation and the highest prices, strong job growth appears to be pushing home sales higher.

Realtors noted a return of first-time home buyers to the market in September, with the highest share of closed sales in four years. Other reports, however, showed a decline in these buyers, who have been largely absent from the housing recovery. While household formation has been improving this year, with more young workers moving out on their own, nearly all of it is on the rental side.

Higher home prices are the biggest barrier to entry in today's housing market. Even though mortgage rates are low, credit availability is still tight for buyers without solid credit scores.

Other housing reports out this week showed a mixed bag. Mortgage applications to purchase a home were down. Sales of newly built homes in September were up, but only after previous months' readings were revised down sharply. Readings of consumer confidence in the housing market were decidedly lower. Closed sales of existing homes did bounce back unexpectedly in September, but those sales represented buyers out shopping in July and August.

Mortgage rates are now at the highest level in four months, but that level is still historically low.

"The average lender is quoting conventional 30-year-fixed rates of 3.625 percent on top tier scenarios, though several remain at 3.5 percent," wrote Matthew Graham, chief operating officer of Mortgage News Daily.