The housing market is feeling the effects of rising mortgage rates, with pending home sales pulling back to year-lows last month as homebuyers struggled to put purchases in play, according to the National Association of REALTORS® (NAR). NAR’s Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, dipped 2.5 percent to 107.3 in November, down from 110.0 in October.
“The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election,” says Lawrence Yun, NAR chief economist. “Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”
All is not lost, however. Rising mortgage rates, according to Yun, will be balanced by a more robust growth in wages in the next year.
“Healthy local job markets amidst tight supply means many areas will remain competitive with prices on the rise,” says Yun. “Those rushing to lock in a rate before they advance even higher will probably have few listings to choose from. Some buyers will have to expand the area of their home search or be forced to delay in order to save a little more money for their down payment.”
The Northeast saw the most pending home sales activity in November, with the PHSI up 0.6 percent to 97.5—now 5.7 percent above one year ago. In the Midwest, the Index was down 2.5 percent to 103.5, 2.4 percent below one year ago. Pending home sales in the South were down 1.2 percent to 118.7, 1.3 percent below one year ago. The Index in the West was down 6.7 percent to 101.0, 1.0 percent below one year ago.
Existing-home sales are still expected to close out 2016 at 5.42 million, which will eclipse 2015 (5.25 million) as the highest since 2006 (6.48 million), according to NAR. The national median existing-home price is also still expected to end 2016 at a 5 percent growth rate.
Looking ahead, existing-home sales are expected to come in at 5.52 million in 2017, while the national median existing-home price is expected to grow 4 percent.
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