Pending home sales in the United States dipped in November to their lowest level in nearly a year with buyers put off by higher mortgage rates and not enough inventory, the latest analysis suggests.
Only the Northeast saw monthly and annual sales gains last month with the pending home sales index from the National Association of Realtors (NAR), a forward looking indicator based on contract signings, down by 2.5%.
After the previous month’s decrease in activity, the index is now 0.4% below where it was last November and is at its lowest reading since January 2016.
According to Lawrence Yun, NAR chief economist, ongoing supply shortages and the surge in mortgage rates affected pending sales in November and higher borrowing costs could cloud the outlook for the housing market in 2017.
‘The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election. Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract,’ he said.
Yun pointed out that NAR’s most recent home survey found that confidence amongst renters about now being a good time to buy has diminished since the beginning of the year but he added that the impact of higher rates will be partly neutralised by stronger wage growth as a result of the two million net new job additions expected next year.
‘Healthy local job markets amidst tight supply means many areas will remain competitive with prices on the rise. Those rushing to lock in a rate before they advance even higher will probably have few listings to choose from. Some buyers will have to expand the area of their home search or be forced to delay in order to save a little more money for their down payment,’ Yun added.
Existing sales are still expected to reach 5.42 million in 2016 which will eclipse the 5.25 million recorded in 2015 and the highest since 2006 when they reached 6.48 million.
Meanwhile, in 2017 sales are forecast to grow roughly 2% and the national median existing-home price is expected to increase to around 5% for 2016 and 4% in 2017.
‘Much more robust new home construction is needed to relieve inventory shortages and lessen the affordability pressures present throughout the country,’ Yun explained.
A breakdown of the index figures show that sales increased by 0.6% in the Northeast and are 5.7% above a year ago while in the Midwest they fell by 2.5% and are now 2.4% lower than November 2015.
Pending home sales in the South decreased 1.2% and are now 1.3% lower than last November and in the West they fell 6.7% and are down 1% compared to a year ago.