Slump in West Pushes November Pending Home Sales Down
Pending home sales fell in November for the third time in four months, the National Association of Realtors reported last week.
The Pending Home Sales Index decreased by 0.9 percent to 106.9 in November from an upwardly revised 107.9 in October. From a year ago, the index was 2.7 percent higher (104.1). NAR said 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).
Regionally, the West provided the biggest hit, falling by 5.5 percent to 100.4, although the index remained 4.5 percent higher than a year ago. This decrease offset a 1.3 percent increase in the South, to 119.9. In the Northeast, pending home sales fell by 3.0 percent to 91.8; in the Midwest, the index rose by 1.0 percent to 104.9.
Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said the index fell despite consensus expectations for a small increase. The decrease dropped pending home sales below the six-month average (108.8).
“The slide in pending home sales is now too persistent to dismiss,” Vitner said. “Affordability has apparently become a more significant hurdle for potential buyers, as prices have risen much faster than incomes.”
However, NAR Chief Economist Lawrence Yun insisted the unexpected November dip in contract activity is a continuation of a most slowing trend after pending home sales peaked last 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,” Yun said. “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.”
Yun added with existing housing inventory already below year ago levels and new home construction still “deficient,” supply constraints and faster price appreciation will likely reappear once the spring buying season begins.
In the meantime, “The sharp drop in pending home sales suggests that closings are likely to fall further in coming months,” Vitner said.
