October Pending Home Sales Fell 2.6%
Washington, DC, November 29, 2018--Pending home sales declined slightly in October in all regions but the Northeast, according to the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 2.6 percent to 102.1 in October, down from 104.8 in September. However, year-over-year contract signings dropped 6.7 percent, making this the tenth straight month of annual decreases.
Lawrence Yun, NAR chief economist, said that ten straight months of decline certainly isn’t favorable news for the housing sector. “The recent rise in mortgage rates have reduced the pool of eligible homebuyers,” he said.
Yun notes that a similar period of decline occurred during the 2013 Taper Tantrum when interest rates jumped from 3.5 percent to 4.5 percent. After 11 months, November 2013 to September 2014, sales finally rebounded when rates decreased. “But this time, interests rates are not going down, in fact, they are probably going to increase even further,” Yun noted.
While the short-term outlook is uncertain, Yun stressed that he is very optimistic about the long-term outlook. The current home sales level matches sales in 2000. “However, mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent. Additionally, there are more jobs today than there were two decades ago,” said Yun. “So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty.”