Pending home sales remain at historically low levels

Pending home sales in November were largely unchanged from October’s levels, a month that saw the lowest pending sales since 2001. according to the latest data from the National Association of Realtors (NAR).

NAR’s Pending Home Sales Index (PHSI) recorded a minor increase to 71.6 in November, from 71.4 one month ago. Year over year, pending sales dropped 5.2%.

“Although declining mortgage rates did not induce more homebuyers to submit formal contracts in November, it has sparked a surge in interest, as evidenced by a higher number of lockbox openings,” said NAR Chief Economist Lawrence Yun in a statement accompanying the data.

Regional data

Regional performance indicated modest rises in pending sales levels in certain pockets of the country during November. According to NAR, higher increases were necessary to substantially impact the month-to-month average of total pending sales.

The Northeast PHSI increased 0.8% to 64.4 but still represented a year-over-year decrease of 6.4% from levels recorded in November 2022. The Midwest PHSI also posted a gain of 0.5% to 76.2 from October but accounts for a 2.2% annual decrease.

In the South, the PHSI fell in November by 2.3% to 83.2, a 6.5% decrease year-over-year. Sales in the West rose last month by 4.2% to a PHSI of 54.0, marking a 4.9% fall from figures recorded one year ago.

Yun adds that rate activity remains on pace to improve in the new year.

“With mortgage rates falling further in December – leading to savings of around $300 per month from the recent cyclical peak in rates – home sales will improve in 2024,” Yun added.

Looking ahead

Lower rates could also improve the new home sales market according to Logan Mohtashami, lead analyst for HousingWire.

“Overall, we can see what happened to new home sales when rates headed toward 8%: they slowed down,” Mohtashami said in a recent article. “The builders were trying their best in an environment with high mortgage rates. However, as the Fed rate hike cycle is over and mortgage rates have fallen 1.5% quickly, we should get more single-family homes into the economy.”

Despite slow sales, home prices continue to rise. Home prices in all nine U.S. census divisions showed a 4.8% annual gain in October, according to the S&P CoreLogic Case-Shiller Home Price Index.