The National Association of Realtors (NAR) released their December 2019 pending home sales report. The report indicates that pending home sales dropped 4.9% nationally. The South region saw the most significant drop with their being of dip of 5.5% from a month earlier.
The Pending Home Sales Index (PHSI) which is the index the NAR uses in order to determine contract closings based on signings for the month fell to 103.4 for December. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing and an index number of 100 is based on activity during 2001. Despite the drop of 4.9% for December from the previous month, pending home sales activity was up 4.6% from 2018 at the same time.
Lawrence Yun, chief economist for NAR believes that the market is still ripe with the economy moving positively however the lack of affordable homes and inventory is adversely affecting the market. Mortgage rates are expected to hold under 4% for most of 2020, while net job creation will likely exceed two million. “Due to the shortage of affordable homes, home sales growth will only rise by around 3%. Still, national median home price growth is in no danger of falling due to inventory shortages and will rise by 4%. The new home construction market also looks brighter, with housing starts and new home sales set to rise 6% and 10%, respectively.”
Below is a breakdown of the regional activity of pending homes sales:
Northeast: The PHSI dropped 4.0% in December to 92.4. This is 0.1% below the same time in 2018.
Midwest: The Midwest PHSI was down 98.8 which was a drop of 3.6%. Despite the lower activity it was 1.3% higher than in December 2018.
West: The index in the West was 93.1. This was 5.4% below the month before and an increase of 7.0% year over year.
South: The South was down 5.5% with the index dropping to 118.1 in December. Overall this was an increase of 7.4% from the same time a year ago.
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