Pending homes sales in the US down year on year for 11 months in a row
Pending home sales in the United States fell by 0.7% in November, but there were minor increases in the Northeast and the West, according to the latest index to be published.
But year on year pending home sales were down by 7.7% and have now declined on an annual basis for 11 months in a row, according to the forward looking index from the National Association of Realtors.
However, according to Lawrence Yun, NAR chief economist, the current sales numbers don’t fully take into account other data. ‘The latest decline in contract signings implies more short term pullback in the housing sector and does not yet capture the impact of recent favourable conditions of mortgage rates,’ he said.
Yun explained that while 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. ‘The West crawled back lightly, but is still experiencing the biggest annual decline among the regions because of unaffordable conditions,’ Yun explained.
Yun suggests that affordability challenges in the West are part of the blame for the drop in sales and he pointed out that home prices in the West region have risen too much, too fast.
‘Land cost is expensive, and zoning regulations are too stringent. Therefore, local officials should consider ways to boost local supply; if not, they risk seeing population migrating to neighbouring states and away from the West Coast,’ Yun added.
He also indicated that the latest Government shutdown will harm 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 area. The longer the shutdown means fewer homes sold and slower economic growth,’ said Yun.
But he believes that there are good longer term prospects for home sales. ‘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. 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,’ he explained.
A breakdown of the index figures show that sales increased in the Northeast by 2.7% in November and are now 3.5% below a year ago while in the Midwest they fell by 2.3% and are 7% lower than November 2017.
Pending home sales in the South fell 2.7% and are 7.4% lower than a year ago. The index in the West increased 2.8% but sales are 12.2% below a year ago.