A measure of pending home sales declined for the third consecutive month, as prices rise and inventory shrinks.
The National Association of Realtors’ pending home sales index declined 2.6 percent in November from the previous month. That represents a much steeper decline than October’s, when pending home sales ticked down 1.1 percent from the previous month. The monthly index tracks contract signings and closings for existing single-family homes, condos and co-ops. Closings usually occur within a month or two of the contract signing.
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Despite the consecutive months of decline, contract signings remain elevated compared to the previous year. Contract signings were up 16.4 percent year over year in November — an all-time record.
Lawrence Yun, NAR’s chief economist, attributed the monthly decline in pending home sales to a shortage of available homes and rising prices. “It is important to keep in mind that the current sales and prices are far stronger than a year ago,” Yun said.
The median home price reached an all-time high in July, exceeding $300,000, as workers, untethered from their offices, hunted for digs with more space for remote working and virtual school. An S&P index which tracks home prices in major metropolitan areas showed prices were up 8.4 percent year over year in October — a growth rate not seen for more than six years.
With more buyers on the market, the supply of homes has also dwindled. Homes under $100,000 were the hardest to come by in November, with 38 percent fewer on the market compared to 2019. By comparison, the supply of homes priced at more than $1 million were down only 1.4 percent year over year.
In 2021, Yun predicted that mortgage rates will rise slightly, to 3 percent from the current 2.7 percent, due to government borrowing.
But with the vaccine and a congressional relief package on the way, Yun anticipates the new year will also bring a 10 percent rise in sales of existing homes and a 20 percent rise in new home sales.