Rising prices and limited inventory combined in November to send pending home sales down 0.9% to an index of 106.9.
In releasing its monthly report, the National Association of Realtors (NAR) said modest gains in the Midwest and South were offset by larger declines in the Northeast and West. The decline was the third in four months.
Still, the Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, is 2.7% above November 2014, the 15th straight monthly year-over-year increase. However, last month's annual gain was the smallest since October 2014.
Slowing trend continues
November's dip in contract activity continues the modestly slowing trend seen ever since pending sales peaked to an over nine year high back in May. "Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months despite low mortgage rates and solid job gains," said Lawrence Yun, NAR chief economist. "While feedback from Realtors continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers."
With existing housing inventory is already below year ago levels and new home construction is still deficient, Yun thinks it's likely that supply constraints and faster price appreciation will reappear once the spring buying season begins.
"Especially with mortgage rates likely on the rise, affordability issues could creep up enough to temper sales growth -- especially to first-time buyers in higher priced markets," he added.
NAR projects existing-home sales will finish 2015 at a pace of around 5.25 million -- the highest since 2006, but roughly 25% below the prior peak set in 2005. The national median existing-home price for all of this year will be close to $220,700, up roughly 6.0% from a year ago.
- The PHSI in the Northeast decreased 3.0% to 91.8 in November, but is still 4.3% above a year ago.
- In the Midwest the index rose 1.0% to 104.9, and is now 4.1% above November 2014.
- Pending home sales in the South were up 1.3% to an index of 119.9 and are 0.5% above where they were a year ago.
- The index in the West dropped 5.5% to 100.4, but is up 4.5% year-over-year.
Separately, there was a big jump last week in the number of first-time applications for state unemployment benefits.
The Department of Labor (DOL) reports initial jobless claims shot up by 20,000 in the week ending December 26 to a seasonally adjusted total of 287,000. The previous week's level was unrevised, and the DOL reports that there were no special factors affecting last week's compilation.
The four-week moving average, which is less volatile than the weekly tally and regarded as a more accurate gauge of the labor market, was up 4,500 -- to 277,000.
The complete report is available on the DOL website.