Pending Home Sales Suffer Largest Drop of Year

The rate at which contracts were signed to purchase homes was down slightlyrnin December the National Association of Realtors® (NAR) said today.  Even though buyers were looking at the lowestrninterest rates of the year NAR’s Pending Home Sales Index (PHSI) was down 3.7rnpercent to 100.7 from the November level of 104.6.  This was the largest decline in the Indexrnsince December 2013 when it dropped 5.8 percent. </p

Despite the monthly number NAR said that the PHSI, a forward-lookingrnindicator of sales, closed out the year 6.1 percent higher than at the samerntime in 2013, the highest annual gain since it rose 11.7 percent from June 2012rnto June 2013.</p

Lawrence Yun, NAR chief economist, says fewer homes available for sale and arnslight acceleration in prices likely led to December’s decline in contractrnsignings. “Total inventory fell in December for the first time in 16 months,rnresulting in fewer choices for buyers and a modest uptick in price growth inrnmarkets throughout the country,” he said. “With interest rates at lows not seenrnsince early 2013, the strength in existing-sales in upcoming months willrnlargely depend on the willingness of current homeowners to realize their equityrngains from the past couple years and trade up.”</p

Adds Yun, “More jobs, increasing consumer confidence, less expensivernmortgage insurance and new low down payment programs coming into thernmarketplace will likely lead to more demand from first-time buyers.”</p

NAR is projecting total existing home sales in 2015 will be about 5.26rnmillion units, 6.6 percent higher than in 2014.  Sales in 2014 were 3.1 percent lower than inrn2013.  NAR’s estimate of median homernprice increases is 4 to 5 percent.   Prices rose 5.8 percent in 2014.</p

Pending sales declined in all four regions with the downturn most severe inrnthe Northeast.  The PHSI in that regionrnfell 7.5 percent to 82.1 but remained 6.3 percent higher than a yearrnearlier.  The Midwest dipped 2.8 percentrnfrom November to December and is 1.9 percent higher than in December 2013.</p

Pending home sales in the South declined 2.6 percent to an index of 116.6, 8.6rnpercent above last December. The index in the West was 94.0, 4.6 percent belowrnthe November level and 6.3 percent above a year ago. </p

NAR’s Pending Home Sales Index is based on a national sample that typicallyrnrepresents about 20 percent of existing home sale transactions.  The level of monthly sales-contract activityrnhas been found to parallel the level of closed sales over the next two months.  An index of 100 is equal to the average levelrnof activity in 2001, the first year to be examined.</p

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