2.6% Dip in Pending Home Sales in October 2.6% Dip in Pending Home Sales in October

2.6% Dip in Pending Home Sales in October

Monday, December 3, 2018

According to the National Association of Realtors, nationwide pending home sales declined in October 2018 in all regions except the Northeast.

The Pending Home Sales Index, an indicator looking forward based on contract signings, decreased 2.6 percent to 102.1 in October, down from 104.8 in September. Also, year-over-year contract signings dropped 6.7 percent, this is the tenth straight month of annual decreases.

Ten straight months of decline certainly isn't favorable news for the housing sector and the recent rise in mortgage rates have reduced the pool of eligible homebuyers.

A similar period of decline occurred during the 2013 Taper Tantrum when interest rates jumped from 3.5 percent to 4.5 percent. After 11 months - November 2013 to September 2014 - sales rebounded when rates decreased. Most experts say that this time, interest rates are not going down, in fact, they say they are probably going to increase even further.

While the short-term outlook is not certain, most experts are optimistic about the long-term outlook. The current home sales level matches sales in 2000.

It is important to note that mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent. Also, there are more jobs today than there were two decades ago.

Those “in the know” expect existing-home sales this year to decrease 3.1 percent to 5.34 million, and the national median existing-home price to increase 4.7 percent. Looking ahead to next year, existing sales are forecast to decline 0.4 percent and home prices to drop roughly 2.5 percent.

It is a fact that prices have galloped ahead of wage growth for too long, particularly in the coastal markets. Now, with the job market getting strong, and home sellers recalculating how aggressive to be with list prices, the housing market is looking to find its footing. However, while inventory remains tight, the underlying demand fundamentals remain strong. The experts expect the pause in activity to end next year.

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