Pending home sales fell on an annual basis for the 12th consecutive month in December, according to the latest report from the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 2.2% in December to 99, down from 102.1 in November. Notably, year over year, contract signings dropped 9.8%.
NAR Chief Economist Lawrence Yun attributed the decline to a plethora of factors.
“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,” Yun said.
In fact, In December, all four major regions experienced a retreat compared with one year ago, with the South declining the furthest.
According to Yun, the partial government shutdown has not caused any obvious damage to home sales.
“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.”
Yun suggests that as the government reopens, more mortgage options will come available for consumers.
“Some home transactions were delayed, but we now expect those sales to go forward,” Yun continued.
Notably, Yun cited year-over-year increases in active listings in certain pockets.
Cities that experienced the largest increase in listings in December 2018 included Denver-Aurora-Lakewood, Colorado; Seattle-Tacoma-Bellevue, Washington; San Francisco-Oakland-Hayward, California; San Diego-Carlsbad, California; and Portland-Vancouver-Hillsboro, Oregon-Washington, according to Realtor.com.
Furthermore, Yun said that despite low home sales in December, he is confident that the housing market will see improvement in 2019.
“The longer-term growth potential is high. The Federal Reserve announced a change in its stance on monetary policy. Rather than four rate hikes, there will likely be only one increase or even no increase at all,” Yun said. “This has already spurred a noticeable fall in the 30-year, fixed-rate for mortgages. As a result, the forecast for home transactions has greatly improved.”
The PHSI in the Northeast moved forward 2% to 93.2 in December and is 2.5% lower than 2017. The Midwest index declined 0.6% to 97.5% but is still 7.2% lower than this period in 2017.
Pending home sales in the South retreated 5% to 109.7, decreasing 13.5% below 2017. Lastly, the index in the West rose 1.7% to 88.4, but dropped 10.8% from 2017.