Better Days Coming in Housing for 2019?
Pending home sales slipped in November, but a reversal is in sight, according to the National Association of REALTORS®’ latest housing report.
NAR’s Pending Home Sales Index—a forward-looking indicator based on contract signings—decreased 0.7 percent to a reading of 101.4 in November. Contract signings are down 7.7 percent year over year.
Slowdown Out West
All four major regions of the U.S. posted a drop in contract signings in November, led by the West, according to NAR’s latest report. “The West crawled back slightly, but is still experiencing the biggest annual decline among the regions because of unaffordable conditions,” Yun says. Home prices in the West region have risen too much and too fast, he adds.
“Land cost is expensive and zoning regulations are too stringent,” Yun notes. “Therefore, local officials should consider ways to boost local supply; if not, they risk seeing population migrating to neighboring states and away from the West Coast.”
However, “the latest decline in contract signings implies more short-term pullback in the housing sector and does not yet capture the impact of recent favorable conditions of mortgage rates,” says Lawrence Yun, NAR’s chief economist. Freddie Mac reported another drop in mortgage rates last week. The 30-year fixed-rate mortgage averaged 4.55 percent, with an average 0.5 points.
Yun says that pending contracts have reached their lowest mark since 2014, but he still predicts solid growth over the long term in the housing market.
More inventory is coming to the market as more homeowners put their home up for sale. The markets seeing the largest year-over-year increases in inventories are: Denver-Aurora-Lakewood, Colo.; Seattle-Tacoma-Bellevue, Wash.; San Francisco-Oakland-Hayward, Calif.; San Diego-Carlsbad, Calif.; and Providence-Warwick, R.I.
Overall, the housing industry looks to close out the year with 5.3 million home sales, which is similar to the year 2000. “But given the 17 million more jobs now compared to the turn of the century, the home sales are clearly underperforming today,” Yun says. “That also means there is steady longer-term growth potential.”