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 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.”
According to Yun, with existing housing inventory already below year ago levels and 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.
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.