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While home prices are on the decline, pending home sales slid for the sixth consecutive month in November, according to the National Association of Realtors. All four U.S. regions recorded month-over-month decreases, and all four regions saw year-over-year declines in transactions.
"Pending home sales recorded the second-lowest monthly reading in 20 years as interest rates, which climbed at one of the fastest paces on record this year, drastically cut into the number of contract signings to buy a home," said NAR Chief Economist Lawrence Yun. "Falling home sales and construction have hurt broader economic activity. With mortgage rates falling throughout December, home-buying activity should inevitably rebound in the coming months and help economic growth."
The Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—fell 4.0% to 73.9 in November. Year-over-year, pending transactions dropped by 37.8%.
“Contract signings for existing homes highlight that housing markets have entered a winter freeze, alongside drastic temperature drops across much of the country, with a 4.0% slide in November, to the lowest level since April 2020, at the peak of the pandemic quarantines," said Realtor.com Senior Economist George Ratiu. "The monthly decline was propelled by drops in all regions, but especially in the Northeast and Midwest. Pending home sales were a noticeable 37.8% below year-ago levels, with double-digit declines in all regions of the country."
Pending Home Sales Regional Breakdown
The Northeast PHSI slipped 7.9% from last month to 63.3, a drop of 34.9% from November 2021. The Midwest index decreased 6.6% to 77.8 in November, a fall of 31.6% from one year ago.
"The Midwest region — with relatively affordable home prices — has held up better, while the unaffordable West region suffered the largest decline in activity," said Yun.
The South PHSI retracted 2.3% to 88.5 in November, fading 38.5% from the prior year. The West index dropped by 0.9% in November to 55.1, retreating 45.7% from November 2021.
"With prices for existing homes still elevated—even with the 10.4% decline from June’s peak—and mortgage rates above 6.0%, homebuyers are finding much of today’s real estate landscape inaccessible," said Ratiu. "Mortgage rates pulled back from November’s highs, but are likely to close the year above 6.0%, keeping a lid on purchase budgets given that the monthly mortgage payment for a median-priced home is $780 higher than it was last year. In turn, homes for sale are spending almost two months on the market, nearly double the time they did in early summer.”
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