The number of homes under contract fell for the sixth month, but Economist Yun expects to see a rebound as late-2022 interest rate drops affect pending sales.
WASHINGTON – In November, pending home sales slid for the sixth consecutive month, according to the National Association of Realtors® (NAR). All four U.S. regions recorded decreases both month-to-month and year-to-year.
“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,” says NAR Chief Economist Lawrence Yun. “Falling home sales and construction have hurt broader economic activity.”
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – fell 4.0% to 73.9 in November. Year-over-year, pending transactions dropped by 37.8%. An index of 100 is equal to the level of contract activity in 2001.
“The residential investment component of GDP has fallen for six straight quarters,” Yun says, but “There are approximately two months of lag time between mortgage rates and home sales.” Since mortgage rates peaked about 7% in October and again in November before falling at the end of 2022, Yun expects pending sales to “inevitably rebound in the coming months and help economic growth.”
Pending home sales regional breakdown: In November, the Northeast PHSI slipped 7.9% to 63.3, a year-to-year drop of 34.9%. The Midwest index decreased 6.6% to 77.8, a fall of 31.6% from one year ago.
The South PHSI retracted 2.3% to 88.5 in November, dropping 38.5% year-to-year. The West index dropped by 0.9% in November to 55.1, retreating 45.7% from November 2021.
“The Midwest region – with relatively affordable home prices – has held up better, while the unaffordable West region suffered the largest decline in activity,” Yun says.
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