Pending home sales decreased by 2.6% in November from the prior month, according to the National Association of Realtors. This is the third consecutive month of declines.
The Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, came in at 125.7 in November. An index of 100 is equal to the level of contract activity in 2001. However, year-over-year, contract signings rose 16.4%.
“The latest monthly decline is largely due to the shortage of inventory and fast-rising home prices. It is important to keep in mind that the current sales and prices are far stronger than a year ago,” said Lawrence Yun, NAR’s chief economist. “The market is incredibly swift this winter with the listed homes going under contract on average at less than a month due to a backlog of buyers wanting to take advantage of record-low mortgage rates.”
Looking to the coming year, Yun has predicted a favorable outlook for the housing market. For his 2021 projections, he said he expects to see a slight upward rise in mortgage rates to around 3% from the current 2.7% rate. According to Yun, existing-home sales are expected to increase roughly 10% and new-home sales by 20% in 2021.
“Economic growth is guaranteed from the stimulus package and from vaccine distribution, but high government borrowing will put modest upward pressure on interest rates,” he said.
All four major regions experienced a decline in month-over-month activity; however, they all saw double-digit year-over-year increases. Pending home sales decreased in the Northeast by 3.3% to 108.6 in November, a 15.3% year-over-year increase. The Midwest index experienced a 3.1% fall to 115.9 in November, up 14.1% from the prior year. In the South, pending home sales declined 1.1% to an index of 150, up 21.3% from November 2019. And, the West’s index fell 4.7% to 111.3, a 10.4% year-over-year increase.
