NAR: Pending home sales fall back in November

Dive Brief:

Pending home sales, which indicate the number of U.S. homes currently under contract, fell 2.5% to 107.3 in November from 110.0 in October, missing analyst expectations of a slight rise, according to the National Association of Realtors’ Pending Home Sales Index released Wednesday.
Of the regions tracked, the West posted the biggest drop in pending home sales in November at 6.7% and is down 1.0% from a year ago; the South dipped 1.2% and is 1.3% behind November 2015; and the Midwest fell 2.5% for the period and is 2.4% lower than a year ago. In the Northeast, however, pending home sales rose 0.6% in November and are 5.7% ahead for the year.
The index’s November reading is 0.4% below the same period a year ago (107.7) and is at the lowest level since January (105.4).

November pending home sales — National Association of Realtors

Dive Insight:

The post-election rise in interest rates has likely nixed the hoped-for impact of President-elect Donald Trump’s win on homebuying activity in the near-term, CNBC reported. NAR Chief Economist Lawrence Yun credits inventory shortages and the sudden increase in mortgage rates following the election for November’s dip in pending sales.

"The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election,” he said in a release. "Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract."

Yun added that projected stronger wage growth could allay that burden somewhat. However, in the NAR’s fourth-quarter Housing Opportunities and Market Experience survey, an indicator of consumer sentiment on housing, fewer renters and homeowners than a year ago were optimistic about the current homebuying environment.

Still, existing-home sales inched upward in November to the highest level in nearly a decade, and new-home sales turned out a similar performance for the month, reaching highs not seen since early 2008. The effect of mortgage rate increases on these two metrics will be more discernible with December’s figures, to be announced in January.

Housing affordability was at its lowest level in eight years during the fourth quarter, according to a recent report from RealtyTrac, as home price gains continue to outpace wage growth. And inventory conditions are staying tight, with homes targeting typical first-time buyers — a market segment key to firmer housing recovery — falling 12.1% year-over-year in the fourth quarter of 2016, according to a new report from Trulia.

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