Inventory Woes Chip Away at Pending Sales
Contracts on home sales in November declined for the third time in four months as home buyers continued to face a limited number of homes for-sale and rising home prices. Large declines in the Northeast and West offset the modest gains in pending home sales in the Midwest and South, according to the National Association of REALTORS®’ Pending Home Sales Index, a forward-looking indicator based on contract signings.
Pending Home Sales By Region
Here’s a look at how contracts for home signings performed in November across the country:
- Northeast: Pending home sales fell 3 percent to 91.8 last month but are 4.3 percent above a year ago.
- Midwest: Pending home sales increased 1 percent to 104.9 and are 4.1 percent above a year ago.
- South: Pending home sales rose 1.3 percent to a reading of 119.9 in November on NAR’s Pending Home Sales Index and are 0.5 percent higher than last November.
- West: Pending home sales fell 5.5 percent to 100.4 but are 4.5 percent above November 2014 totals.
The index nudged down 0.9 percent to a reading of 106.9 in November month-over-month but is still 2.7 percent above November 2014. Contract activity has continued to recede since peaking at a nine-year high in May.
“Home prices rising too sharply in several markets, mixed signs of an economy losing momentum, and waning supply levels have acted as headwinds in recent months despite low mortgage rates and solid job gains,” says Lawrence Yun, NAR’s chief economist. “While feedback from REALTORS® continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers.”
The inventory of existing homes is below year-ago levels, and new-home construction still remains low. As such, supply constraints and faster price appreciation will likely once again be evident in the spring buying season, Yun says.
“Especially with mortgage rates likely on the rise, affordability issues could creep up enough to temper sales growth—especially to first-time buyers in higher priced markets,” Yun says.
The national median home price for existing-homes for 2015 will be close to $220,700—up about 6 percent from a year ago, according to NAR’s report. Existing-home sales are forecast to finish up the year at around 5.25 million, which is the highest since 2006 but about 25 percent below the prior peak set in 2005 (7.08 million).