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Tight Inventories Push Down Pending Home Sales

by Peter Thomas Ricci

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Pending home sales in November declined for the third time in four months as buyers continue to battle both rising home prices and limited homes available for sale, according to the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.9 percent to 106.9 in November from an upwardly revised 107.9 in October but is still 2.7 percent above November 2014 (104.1). Although the index has increased year-over-year for 15 consecutive months, last month’s annual gain was the smallest since October 2014 (2.6 percent).

Yun – Slowing Momentum Impacts Pending Sales

Lawrence Yun, NAR’s chief economist, explained that November’s dip in contract activity mirrors larger trends in housing and the economy.

“Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months despite low mortgage rates and solid job gains,” Yun said. “While feedback from Realtors continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers.”

The 2015 Housing Forecast

Existing-home sales are forecast to finish 2015 at a pace of around 5.25 million – the highest since 2006, but roughly 25 percent below the prior peak set in 2005 (7.08 million). The national median existing-home price for all of this year will be close to $220,700, up around 6.0 percent from a year ago.

The PHSI in the Northeast decreased 3.0 percent to 91.8 in November, but is still 4.3 percent above a year ago. In the Midwest the index rose 1.0 percent to 104.9 in November, and is now 4.1 percent above November 2014.

Pending home sales in the South increased 1.3 percent to an index of 119.9 in November and are 0.5 percent higher than last November. The index in the West declined 5.5 percent in November to 100.4, but remains 4.5 percent above a year ago.

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