Pending Home Sales Fall to Five-Year Low

Pending home sales fell to their lowest level since 2014, the National Association of Realtors reported yesterday.

The NAR Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased by 2.2 percent to 99.0 in December, down from 101.2 in November. Additionally, year-over-year contract signings fell by nearly 10 percent, making the 12th straight month of annual decreases.

All four regions experienced a decline compared to one year ago, with the South sustaining the largest decrease falling by 5 percent to 109.7 and by 13.5 percent from a year ago. In the West, pending sales increased by 1.7 percent to 97.5 in December but fell by 7.2 percent from a year ago.

In the Northeast, the index rose by 2.0 percent to 93.2 in December but is 2.5 percent lower than a year ago. In the Midwest, the index fell by 0.6 percent to 97.5 in December, and 7.2 percent lower from a year ago.

“December’s drop in pending sales was likely the reflection of potential home buyers reacting to the economic uncertainty and significant stock market volatility we saw toward the end of 2018,” said Joel Kan, MBA Associate Vice President of Industry Surveys and Forecasting. “Weakness in purchase mortgage application activity was prevalent before and around the holidays as well, but there has been a rebound in some of the past few weeks. If home prices continue to moderate, and inventory starts to rise more meaningfully, it is likely that home sales will start to pick up headed into the spring buying season.”

“The stock market correction hurt consumer confidence, record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December,” said NAR Chief Economist Lawrence Yun.

Yun said so far, the partial government shutdown had not caused any obvious damage to home sales. “Seventy-five percent of realtors reported that they haven’t yet felt the impact of the government closure,” he said. “However, if another government shutdown takes place, it will lead to fewer homes sold.”

Yun cited year-over-year increases in active listings from data at to illustrate a potential rise in inventory. Denver, Seattle, San Francisco-Oakland, San Diego and Portland, Ore. saw the largest increase in active listings in December from a year ago.