Sales contracts for previously-owned homes in the U.S. unexpectedly dropped in November, marking the second month of declines.
The index of pending home sales fell 0.7 percent month-over-month in November, according to recent data released by the National Association of Realtors in Washington. The index fell 7.7 percent from a year ago (on an unadjusted basis), following a downwardly revised 4.7 percent slump in October.
Economists polled by Reuters had forecast pending home sales to rise 0.7 percent last month.
These weaker results point to continuing challenges the market faces: higher mortgage rates and elevated home prices. These factors could be keeping a significant portion of buyers on the sidelines of the housing market, a recent article from National Mortgage News explains.
Why Pending Home Sales Matter
Economists watch pending home sales very carefully, as they are leading indicator of strength in the real estate market, which greatly affects our overall economy. Pending home sales figures track contract signings, which provide a pretty solid forecast of completed home sales in the coming months. However, pending home sales are not the same as purchases of existing homes, which are tabulated once the sale officially closes.
Pending home sales fell in the Midwest and the South, both losing more than 2 percent from the month prior. Meanwhile, the Northeast and West saw their pending home sales increase.
On a year-over-year basis, all four major regions of the nation saw drops in their pending home sales.
- In the Midwest, pending home sales lost 7.0 percent year-over-year, bringing it to 98.1.
- The South saw a 7.4 percent drop, bringing that region’s figure to 115.7.
- The Northeast experienced decrease of 3.5 percent, putting their index reading at 95.1.
- The West had the most significant year-over-year decline, losing 12.2 percent and putting their reading at 87.2.
It’s Not All Bad News
While it may sound like the housing market is struggling, most experts are saying there’s no need to worry — at least, not yet. Although pending home sales figures are weaker than expected, previously released data from the National Association of Realtors (NAR) showed purchases of previously-owned homes rose for a second straight month and exceeded forecasts in November. Therefore, the latest pending home sales figures present more of a caution sign than a signal of impending doom.
National Mortgage News puts it this way:
“While the [pending home sales] report doesn’t signal a dramatic collapse in housing, the recovery may have trouble gaining traction.”
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