Pending Home Sales Fell 0.7% in November
Washington, DC, January 2, 2019-The Pending Home Sales Index decreased 0.7% to 101.4 in November, down from 102.1 in October, according to the National Association of Realtors. However, year-over-year contract signings dropped 7.7%, making this the eleventh straight month of annual decreases.
Lawrence Yun, NAR chief economist, said the current sales numbers don’t fully take into account other data. “The latest decline in contract signings implies more short-term pullback in the housing sector and does not yet capture the impact of recent favorable conditions of mortgage rates,” he said.
Yun added that while pending contracts have reached their lowest mark since 2014, there is no reason to be overly concerned, and he predicts solid growth potential for the long-term.
All four major regions sustained a drop when compared to one year ago, with the West taking the brunt of the decrease. “The West crawled back lightly but is still experiencing the biggest annual decline among the regions because of unaffordable conditions,” Yun said.
Yun suggests that affordability challenges in the West are part of the blame for the drop in sales. Home prices in the West region have risen too much, too fast, according to Yun. “Land cost is expensive, and zoning regulations are too stringent. Therefore, local officials should consider ways to boost local supply; if not, they risk seeing population migrating to neighboring states and away from the West Coast.”
Yun indicated the latest government shutdown will harm the housing market. “Unlike past government shutdowns, with this present closure, flood insurance is not available. That means that roughly 40,000 homes per month may go unsold because purchasing a home requires flood insurance in those affected areas,” Yun said. “The longer the shutdown means fewer homes sold and slower economic growth.”