WASHINGTON – Jan. 30, 2019 – Pending home sales declined in December, but for the second straight month, the Western region experienced a slight increase, according to the National Association of Realtors®(NAR).
The Pending Home Sales Index (PHSI) – a forward-looking indicator based on contract signings – decreased 2.2 percent to 99.0 in December, down from 101.2 in November. Additionally, year-over-year contract signings fell 9.8 percent, making December the twelfth straight month of annual decreases.
Lawrence Yun, NAR chief economist, cites several reasons for the decline in pending sales.
"The stock market correction hurt consumer confidence, record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December," Yun says.
All four major regions experienced a year-to-year decline compared, with the South, an area that includes Florida, sustaining the largest decrease.
However, the partial government shutdown didn't cause any obvious damage to home sales, Yun says, but another shutdown could. "Seventy-five percent of Realtors reported that they haven't yet felt the impact of the government closure. However, if another government shutdown takes place, it will lead to fewer homes sold."
The end of the partial shutdown may even be beneficial to the housing industry, according to Yun. As the government reopens, more mortgage options will become available, and while "some home transactions were delayed, we now expect those sales to go forward."
Despite the low home sales in December, Yun is confident the housing market will see improvement in 2019.
"The longer-term growth potential is high," he says. "The Federal Reserve announced a change in its stance on monetary policy. Rather than four rate hikes, there will likely be only one increase or even no increase at all. This has already spurred a noticeable fall in the 30-year, fixed-rate for mortgages. As a result, the forecast for home transactions has greatly improved."
December pending home sales regional breakdown
The PHSI in the Northeast rose 2.0 percent to 93.2 in December and is now 2.5 percent below a year ago. In the Midwest, the index fell 0.6 percent to 97.5 in December – 7.2 percent lower than December 2017.
Pending home sales in the South fell 5 percent to an index of 109.7 in December, which is 13.5 percent lower than a year ago. The index in the West increased 1.7 percent in December to 88.4 and fell 10.8 percent year-to-year.