Pending home sales slide in December
Pending home sales fell in December, taking a step back after increasing slightly in November, the National Association of Realtors reported this morning.
The Pending Home Sales Index (PHSI) fell 4.9% to 103.2 in December. Year-over-year contract signings increased 4.6%, however. An index of 100 is equal to the level of contract activity in 2001. The PHSI is a forward-looking indicator based on contract signings.
“Mortgage rates are expected to hold under 4% for most of 2020, while net job creation will likely exceed two million,” said Lawrence Yun, NAR’s chief economist.
While Yun noted that these factors are promising for the housing market, Yun cautioned that low inventory remains a significant longer-term concern.
“Due to the shortage of affordable homes, home sales growth will only rise by around 3%,” Yun predicted. “Still, national median home price growth is in no danger of falling due to inventory shortages and will rise by 4%."
Looking ahead, Yun said that residential construction could see a very strong year in 2020. "The new home construction market also looks brighter, with housing starts and new home sales set to rise 6% and 10%, respectively.”
All regional indices were down in December. The Northeast PHSI slipped 4% to 92.4 in December, 0.1% lower than a year ago. In the Midwest, the index dropped 3.6% to 98.8 last month, 1.3% higher than in December 2018.
Pending home sales in the South decreased 5.5% to an index of 118.1 in December, a 7.4% increase from December 2018. The index in the West fell 5.4% in December 2019 to 93.1, an increase of 7% from a year ago.
Yun noted that the markets where listing prices are around $250,000 – an affordable price point in most markets nationally – are drawing some of the most significant buyer attention, including Fort Wayne, Ind.; Burlington, N.C.; Topeka, Kan.; Pueblo, Colo.; and Columbus, Ohio.
“The state of housing in 2020 will depend on whether home builders bring more affordable homes to the market,” Yun said. “Home prices and even rents are increasing too rapidly, and more inventory would help correct the problem and slow price gains.”
The Pending Home Sales Index (PHSI) fell 4.9% to 103.2 in December. Year-over-year contract signings increased 4.6%, however. An index of 100 is equal to the level of contract activity in 2001. The PHSI is a forward-looking indicator based on contract signings.
“Mortgage rates are expected to hold under 4% for most of 2020, while net job creation will likely exceed two million,” said Lawrence Yun, NAR’s chief economist.
While Yun noted that these factors are promising for the housing market, Yun cautioned that low inventory remains a significant longer-term concern.
“Due to the shortage of affordable homes, home sales growth will only rise by around 3%,” Yun predicted. “Still, national median home price growth is in no danger of falling due to inventory shortages and will rise by 4%."
Looking ahead, Yun said that residential construction could see a very strong year in 2020. "The new home construction market also looks brighter, with housing starts and new home sales set to rise 6% and 10%, respectively.”
All regional indices were down in December. The Northeast PHSI slipped 4% to 92.4 in December, 0.1% lower than a year ago. In the Midwest, the index dropped 3.6% to 98.8 last month, 1.3% higher than in December 2018.
Pending home sales in the South decreased 5.5% to an index of 118.1 in December, a 7.4% increase from December 2018. The index in the West fell 5.4% in December 2019 to 93.1, an increase of 7% from a year ago.
Yun noted that the markets where listing prices are around $250,000 – an affordable price point in most markets nationally – are drawing some of the most significant buyer attention, including Fort Wayne, Ind.; Burlington, N.C.; Topeka, Kan.; Pueblo, Colo.; and Columbus, Ohio.
“The state of housing in 2020 will depend on whether home builders bring more affordable homes to the market,” Yun said. “Home prices and even rents are increasing too rapidly, and more inventory would help correct the problem and slow price gains.”