Pending home sales slide in November

Pending home sales declined in November as month-over-month contract activity fell in each of the four major U.S. regions, the National Association of Realtors reported.

The latest Pending Home Sales Index (PHSI) fell 2.6% to 125.7 in November, the third straight month of decline.

But year-over-year, contract signings climbed 16.4%. The PHSI is a forward-looking indicator of home sales based on contract signings with an index of 100 equal to the level of contract activity in 2001.

“The latest monthly decline is largely due to the shortage of inventory and fast-rising home prices,” said Lawrence Yun, NAR’s chief economist. “It is important to keep in mind that the current sales and prices are far stronger than a year ago.”

“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,” Yun said.

Yun predicts a favorable outlook for the housing market in the coming year. According to his 2021 projections, there will be a slight upward rise in mortgage rates to around 3% from the current 2.7% rate. Existing-home sales are expected to increase roughly 10% and new home sales by 20% next year.

“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.

November pending home sales regional breakdown:

• The Northeast PHSI slid 3.3% to 108.6 in November, a 15.3% increase from a year ago. 
• In the Midwest, the index fell 3.1% to 115.9 last month, up 14.1% from November 2019.
• Pending home sales in the South decreased 1.1% to an index of 150.0 in November, up 21.3% from November 2019. 
• The index in the West fell 4.7% in November to 111.3, which is up 10.4% from a year ago.

The complete Pending Home Sales report for November 2020 is available here.