Pending home sales in November slightly declined for the third time in four months as buyers continue to battle both rising home prices and limited homes available for sale, according to the National Association of REALTORS®. Modest gains in the Midwest and South were offset by larger declines in the Northeast and West.
The Pending Home Sales Index,a forward-looking indicator based on contract signings, decreased 0.9 percent to 106.9 in November from an upwardly revised 107.9 in October but is still 2.7 percent above November 2014 (104.1). Although the index has increased year-over-year for 15 consecutive months, last month’s annual gain was the smallest since October 2014 (2.6 percent).
Lawrence Yun, NAR chief economist, says November’s dip in contract activity continues the modestly slowing trend seen ever since pending sales peaked to an over nine year high back in May. “Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months despite low mortgage rates and solid job gains,” he says. “While feedback from REALTORS®continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers.”
According to Yun, with existing housing inventory already below year ago levelsand new home construction still deficient, it’s likely supply constraints and faster price appreciation will reappear once the spring buying season begins.
“Especially with mortgage rates likely on the rise, affordability issues could creep up enough to temper sales growth – especially to first-time buyers in higher priced markets,” adds Yun.
Jonathan Smoke, chief economist for realtor.com®, stated, “The underling regional data revealed differing patterns by region. While the Midwest and the South were up moderately, the Northeast and the West were down the most.
“Based on traffic and listing views on realtor.com, we see demand and interest in real estate remaining strong. However the existing home market is clearly slowing in terms of growth in sales as a result of continuing tight level of supply and corresponding above normal increases in prices. At the same time, we are finally beginning to see more growth in single-family construction and new home sales, so the share of home sales represented by new construction is slowly edging up.
However, it should be noted that we are in the slowest time of the year for sales, so it is very difficult to assess any major shifts. January web activity and survey data on buyer intentions will give us the next good indicator on how 2016 should start. At this point the November sales are consistent with our expectations for 2016: slower growth but with more stability and balance.”
Existing-home sales are forecast to finish 2015 at a pace of around 5.25 million – the highest since 2006, but roughly 25 percent below the prior peak set in 2005 (7.08 million). The national median existing-home price for all of this year will be close to $220,700, up around 6.0 percent from a year ago.
On Tuesday, January 12, NAR will release a 2016 housing outlook forecast video, infographic and news release.
The PHSI in the Northeast decreased 3.0 percent to 91.8 in November, but is still 4.3 percent above a year ago. In the Midwest the index rose 1.0 percent to 104.9 in November, and is now 4.1 percent above November 2014.
Pending home sales in the South increased 1.3 percent to an index of 119.9 in November and are 0.5 percent higher than last November. The index in the West declined 5.5 percent in November to 100.4, but remains 4.5 percent above a year ago.
For more information, visit www.realtor.org.
