Pending home sales are off for the sixth month
The number of signed contracts to buy existing homes fell again in November, the National Association of Realtors reported.
- NAR’s pending home sales index fell 4% in November after posting a similar drop in October.
- Except for a dip during the pandemic, November's index was the lowest on record since NAR began tracking the data in 2001.
- Interest rates “drastically cut into the number of contract signings to buy a home,” NAR chief economist Lawrence Yun said.
Signed contracts to buy single-family homes dropped again in November, marking a half-year of monthly declines as higher mortgage rates weakened demand.
The National Association of Realtors released its latest pending home sales index Wednesday that showed all four regions of the U.S. reporting year-over-year declines in both signed contracts and actual sales, with the Northeast posting the biggest drop.
Nationally, pending home sales fell 4% in November, and year-over-year pending transactions slid by nearly 38%, NAR reported. Regionally, the monthly declines were as follows:
The report, which measures contracts signed to purchase single-family homes, condos and co-ops, provides an early estimate of home sales that would typically take place one or two months after a contract is signed.
Except for a dip during the pandemic, November's index was the lowest on record since NAR began tracking the data in 2001.
"Pending home sales recorded the second-lowest monthly reading in 20 years as interest rates, which climbed at one of the fastest paces on record this year, drastically cut into the number of contract signings to buy a home," said Lawrence Yun, NAR chief economist.
Mortgage rates have more than doubled since the spring, as the Federal Reserve has raised interest rates to curb inflation. While Fed chairman Jerome Powell said he expects more increases in 2023, he has indicated that the pace of rate hikes will slow.
In October, Yun called higher interest rates "harmful to the housing market," as monthly contract signings fell by 4.6% over September.
Yun added that "with mortgage rates falling throughout December, home-buying activity should inevitably rebound in the coming months and help economic growth."
When exactly that might happen is hard to predict, however. "High home prices, affordability challenges, and more rental options have led some prospective buyers to hang on the sidelines for longer than they anticipated," said Lisa Sturtevant, chief economist at Bright MLS.
While the West posted a small monthly decline, the region, which has some of the "least affordable housing markets in the country," saw the biggest year-over-year decline in pending sales, noted Sturtevant. In November, the pending home sales index in the West was down 45.7% over last year, compared to an annual decline of 31.6% in the Midwest.
"Buyers that remain in the market are finding relatively few options. Both buyers and sellers seem to be writing off 2022 at this point, looking ahead to the new year," Sturtevant said.