Pending home sales declined slightly in October in all regions but the Northeast, experiencing an overall decline of 2.6 percent (down from 104.8 in September to 102.1 in October), according to the National Association of Realtors’ (NAR) Pending Home Sales Index. Year-over-year contract signings also fell by 6.7 percent, making this the tenth straight month of annual decreases.
Lawrence Yun, Chief Economist at NAR, noted that 2013 had a similar period of decline, wherein interests rate went up from 3.5 percent to 4.5 percent. He added that “sales finally rebounded after 11 months between November 2013 to September 2014, when rates decreased."
“But this time, interests rates are not going down, in fact, they are probably going to increase even further,” Yun added. Ten straight months of decline certainly isn’t favorable news for the housing sector. “The recent rise in mortgage rates have reduced the pool of eligible homebuyers,” he said.
Yun expects existing-home sales this year to decrease 3.1 percent to 5.34 million, and the national median existing-home price to increase by 4.7 percent. Next year, existing sales are projected to decline by 0.4 percent and home prices to drop roughly 2.5 percent, according to the report.
Yun is optimistic about the future, although the short-term outlook is uncertain. The current home sales level matches sales in 2000. “However, mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent. Additionally, there are more jobs today than there were two decades ago,” Yun said. “So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty.”
Denver-Aurora-Lakewood, Colorado Seattle-Tacoma-Bellevue, Washington Columbus, Ohio; San Francisco-Oakland-Hayward, California; and San Diego-Carlsbad, California saw the largest increase in active listings in October compared to the previous year.
October Pending Home Sales Regional Breakdown
The PHSI in the Northeast was up by 0.7 percent to 92.9 in October. It is now 2.9 percent below where it was last year. In the Midwest, the index fell 1.8 percent to 100.4 in October and is 4.9 percent lower than October 2017.
In the South, pending home sales in the decreased 1.1 percent to an index of 118.9 in October, which is a decline by 4.6 percent last year. The index in the West fell by 8.9 percent in October to 84.8 and declined by 15.3 percent below a year ago.