Pending Home Sales Slump Again in November as Housing Market Faces Big Chill

Getty Images/Seth Joel

The numbers: Pending sales of homes in the U.S. fell again in November to a four-year low in another sign of widespread weakness in the real-estate market that’s likely to continue into 2019.

U.S. pending home sales fell 0.7% to a reading of 101.4 in November from 102.1, the National Association of Realtors said Friday.

One caveat: The latest report was compiled before a sharp drop in interest rates in the past month that have made mortgages a bit cheaper.

What happened: How big is the slowdown in home sales? NAR’s index, which tracks contract signings, is down 7.7% compared with a year ago.

Contract signings usually precede closings by about 45 days, so the pending-home-sales release is considered a leading indicator for the existing-home-sales report.

In November, pending sales were up 2.8% in the West and 2.7% in the Northeast, but they declined 2.3% in the Midwest and 2.7% in the South.

Sales are lower in all four regions as compared with the comparable time frame a year ago, however.

Big picture: Home sales and construction have taken a big hit from rising U.S. interest rates, while a shortage of skilled trade people has hampered builders. There are still plenty of people who want to buy a home, but prices remain relatively high, and the increase in mortgage rates hasn’t helped.

Lawrence Yun, the chief economist of NAR, said an extended government shutdown could reduce sales by as many as 40,000 homes a month because federal flood insurance is temporarily unavailable.

What they are saying?: “The latest decline in contract signings implies more short-term pullback in the housing sector and does not yet capture the impact of recent favorable conditions of mortgage rates,” Yun said.

Market reaction: The 10-year U.S. Treasury yield has retreated in recent weeks, falling to 2.75% from a seven-year high of almost 3.25% nearly two months ago. The decline still doesn’t bring mortgage rates back to where they were a year ago, but it might help goose home sales a bit.

The Dow Jones Industrial Average and S&P 500 had declined modestly as of this writing, with an up-and-down Friday in character for a seesaw holiday week on Wall Street.

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