The National Association of Realtors (NAR) seasonally adjusted pending home sales index declined – and was well under expectations. Our analysis of pending home sales shows improvement – but does forecast relatively weak December existing home sales. The quote of the day from this NAR release:
Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months …
Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing).
The NAR reported:
- Pending home sales index was down 0.9 % month-over-month and up 3.9 % year-over-year (last month was reported +2.7 % year-over-year).
- The market was expecting month-over-month growth of 0.0 % to 2.4 % (consensus 0.5 %) versus the growth of -0.9 % reported.
Econintersect‘s evaluation using unadjusted data:
- the index growth was up 2.8 % month-over-month and up 5.1 % year-over-year.
- The current trends (using 3 month rolling averages) insignificantly declined but remains in expansion.
- Extrapolating the pending home sales unadjusted data to project December 2015 existing home sales, this would be a 5.3 % contraction year-over-year for existing home sales.
Unadjusted 3 Month Rolling Average of Year-over-Year Growth for Pending Home Sales (blue line) and Existing Home Sales (red line)
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From Lawrence Yun , NAR chief economist:
…. November’s dip in contract activity continues the modestly slowing trend seen ever since pending sales peaked to an over nine year high back in May. Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months despite low mortgage rates and solid job gains. While feedback from Realtors® continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers.
With existing housing inventory already below year ago levels and new home construction still deficient, it’s likely supply constraints and faster price appreciation will reappear once the spring buying season begins.
Especially with mortgage rates likely on the rise, affordability issues could creep up enough to temper sales growth – especially to first-time buyers in higher priced markets.
