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Pending sales stay cold in December

The latest data on signed-contract activity doesn’t bode well for an early spring boost in home sales.

Pending home sales declined by 2.2 percent in December compared to the prior month, according to the National Association of Realtors (NAR), and also ran 9.8 percent below December 2017 levels. This was the 12th consecutive month that signed-contract activity was lower on a year-over-year basis.

pendsales“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,” NAR Chief Economist Lawrence Yun said.

Pending sales were down in all regions year over year. The South region saw the greatest annual decline at 13.5 percent, followed by the West region with a 10.8 percent drop in pending sales. The rates in the Midwest and Northeast were down 7.2 percent and 2.5 percent, respectively. 

Government shutdown had little impact

Yun said December’s contract activity wasn’t hampered by the partial government shutdown. He said that some closings may have been delayed, but those are expected to go forward.

“Seventy-five percent of Realtors reported that they haven’t yet felt the impact of the government closure,” Yun said. “However, if another government shutdown takes place, it will lead to fewer homes sold,” he said.

Realtors are cautiously optimistic that pending sales will improve. Several cities in the high-cost West region have seen an uptick in active listings, including the metro areas of Denver, Seattle, San Francisco, San Diego and Portland, Oregon.

In the West region, pending sales increased month over month in December by 1.7 percent. This was the second consecutive month with a slight increase in contract activity compared to the prior month. Pending sales also rose over the month in the Northeast by 2 percent.

Yun also noted the Federal Reserve has signaled its plans to be less aggressive in raising short-term rates this year, and could potentially make one or fewer rate hikes in 2019. Previously, it was widely believed that the Fed could raise interest rates as many as four times this year.

“This has already spurred a noticeable fall in the 30-year fixed rate for mortgages,” Yun said. “As a result, the forecast for home transactions has greatly improved.”


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