Pending home sales overall slipped in November but experienced small increases in the Northeast and the West, according to the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.7 percent to 101.4 in November, down from 102.1 in October. However, year-over-year contract signings dropped 7.7 percent, making this the eleventh straight month of annual decreases.
"The latest decline in contract signings implies more short-term pullback in the housing sector and does not yet capture the impact of recent favorable conditions of mortgage rates," said Lawrence Yun, NAR’s chief economist. "The West crawled back lightly but is still experiencing the biggest annual decline among the regions because of unaffordable conditions," Yun said.
Pending contracts have reached their lowest mark since 2014, there is no reason to be overly concerned, and he predicts solid growth potential for the long-term. All four major regions sustained a drop when compared to one year ago, with the West taking the brunt of the decrease.
"Land cost is expensive, and zoning regulations are too stringent,” said Yun. “Therefore, local officials should consider ways to boost local supply; if not, they risk seeing population migrating to neighboring states and away from the West Coast."
And the government shutdown won’t be good for the housing market.
"Unlike past government shutdowns, with this present closure, flood insurance is not available. That means that roughly 40,000 homes per month may go unsold because purchasing a home requires flood insurance in those affected areas," Yun said. "The longer the shutdown means fewer homes sold and slower economic growth."
Among the cities with the greatest year over year increase in active listings are Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., San Francisco-Oakland-Hayward, Calif., San Diego-Carlsbad, Calif., and Providence-Warwick, RI., according to realtor.com.
"Home sales in 2018 look to close out the year with 5.3 million home sales, which would be similar to that experienced in the year 2000,” said Yun. “But given the 17 million more jobs now compared to the turn of the century, the home sales are clearly underperforming today. That also means there is steady longer-term growth potential."
A Regional Look at The Index
The Pending Home Sales Index in the Northeast rose 2.7 percent to 95.1 in November and is now 3.5 percent below a year ago. In the Midwest, the index fell 2.3 percent to 98.1 in November and is 7.0 percent lower than November 2017.
Pending home sales in the South fell 2.7 percent to an index of 115.7 in November, which is 7.4 percent lower than a year ago. The index in the West increased 2.8 percent in November to 87.2 and fell 12.2 percent below a year ago.
