According to the monthly report by the National Association of Realtors (NAR) released on Wednesday, contracts to buy previously owned homes in the United States were 0.4% fewer in November compared to the same month a year earlier. It followed two straight periods of increase, with the respective index of sales increasing 1.8% year-on-year in October.
In monthly terms, the pending home sales index slumped 2.5% in November to a level of 107.3, or the lowest since January, which suggested that monetary policy tightening may have begun to affect the US housing sector. Actual data confounded the median estimate by experts, pointing to a 0.5% increase. In October, pending home sales edged up at a monthly rate of 0.1%.
“The brisk upswing in mortgage rates and not enough inventory dispirited some would-be buyers”, the NAR noted in the report.
“The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election”, said Lawrence Yun, NAR chief economist. “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.”
According to Yun, the effect of higher interest rates will be partially offset by faster wage growth, as market analysts project up to 2 million net new job additions in 2017.
“Healthy local job markets amidst tight supply means many areas will remain competitive with prices on the rise. Those rushing to lock in a rate before they advance even higher will probably have few listings to choose from”, he noted.
In November, pending home sales dropped the most in the West area, by 6.7% year-on-year, followed by a 2.5% slump in the Midwest and a 1.2% fall in the South. On the other hand, sales went up 0.6% in the Northeast region during the same period.
The pending home sales index represents a leading indicator of housing market activity, which is based on signed real estate contracts for existing single-family homes, condos and co-ops. At least 80% of pending home sales usually become actual home sales about one or two months after a contract has been signed.
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