Pending home sales in November were unchanged from October and 5.2% lower than in November of last year, according to the National Association of Realtors.
The reading, which is based on contracts signed during the month, is a forward-looking indicator of closed sales as well as the latest look at what potential homebuyers are thinking.
Mortgage rates are key to this report, with the average rate on a 30-year fixed mortgage rising more than 8% in mid-October before falling sharply to 7.5% in the first week of November, according to Mortgage News Daily. It ended the month at about 7.25%.
Analysts had expected this decline to lead to a slight increase in pending sales, but that was clearly not enough, given rising home prices and a lack of supply.
“Although lower mortgage rates did not prompt more homebuyers to submit formal contracts in November, it did spark a rise in interest, as evidenced by a rise in the number of safe deposit box openings,” said Lawrence Yun, chief economist at NAR.
Regionally, pending sales rose 0.8% month-over-month in the Northeast and 0.5% in the Midwest. Sales gained stronger, 4.2%, in the West — where prices are highest and lower mortgage rates will have the greatest impact — and fell 2.3% in the South. Pending sales were lower in all regions in November compared to the same month in 2022.
Mortgage rates are now solidly in the mid-6% range, but the supply of homes for sale remains very low. Builders are ramping up production, but new homes come at a higher price. Existing home prices continue to rise.
“With mortgage rates falling further in December — saving about $300 a month from the recent cyclical peak in rates — home sales will improve in 2024,” Yoon added.
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