The drop reverses an increase in Oct. NAR Economist Yun attributes it to a tight inventory supply and buyer hesitation over rising home prices.
WASHINGTON – Pending home sales slipped in November (down 2.2%), receding slightly after a previous month of gains, according to the National Association of Realtors® (NAR). Each of the four major U.S. regions included in the monthly study saw a month-to-month decline. The drop was similar (down 2.7%) year-over-year.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – fell to 122.4 in November. An index of 100 is equal to the level of contract activity in 2001.
“There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices,” says Lawrence Yun, NAR’s chief economist. “While I expect neither a price reduction nor another year of record-pace price gains, the market will see more inventory in 2022, and that will help some consumers with affordability.”
Yun says overall housing demand remains high, noting that homes placed on the market go from “listed status” to “under contract” in about 18 days.
“Buyer competition alone is unrelenting, but home seekers have also had to contend with the negative impacts of supply chain disruptions and labor shortages this year,” he says. “These aspects, along with the exorbitant prices and a lack of available homes, have created a much tougher buying season.”
Yun adds one more reason into the mix for the December decline: The omicron variant of the COVID-19 virus. He says that poses a risk to the housing market’s performance, as buyers and sellers are sidelined, and home construction is delayed.
Regional breakdown: Month-over-month, the Northeast PHSI declined 0.1% to 99.4 in November, an 8.5% drop from a year ago. In the Midwest, the index fell 6.3% to 116.8 month-to-month, up 0.2% from November 2020.
Pending home sale transactions in the South ticked down 0.7% to an index of 148.2 in November, down 1.3% from November 2020. The index in the West slipped 2.2% in November to 105.5, down 4.6% year-to-year.
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