While the National Association of Realtors’ Existing-Home Sales Report signaled an “autumn revival” last fall, the Pending Home Sales Index (PHSI) painted a bit of a different picture, with rollercoaster indices that took a sharp turn downward in November thanks to continuing inventory problems and increasing mortgage rates.
Thankfully, the latest PHSI have ticked slightly upward — a welcome ending to a nail-biting year.
“Pending sales rebounded last month as enough buyers fended off rising mortgage rates and alarmingly low inventory levels to sign a contract,” said NAR Chief Economist Lawrence Yun in a statement.
“The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs. Sales will struggle to build on last year’s strong pace if inventory conditions don’t improve.”
December’s PHSI jumped to 109.0 — a 1.6 percent increase from November’s 107.3.
Regional outlook
The PHSI in the Northeast dipped to 96.4 and is 1.2 percent below a year ago.
In the Midwest, the index declined to 102.7, and is now 3.4 percent lower than December 2015.
Pending home sales in the South rose to an index of 121.3 — a 2.4 percent month-over-month and 0.5 percent year-over-year increase.
The West experienced the biggest gains with an index of 106.1 — a 5.0 percent month-over-month and year-over-year decrease.
Yun says the health of the 2017 housing market will continue to be dependent on borrowing costs, consistent job growth, and more affordable available inventory at the $100,000 to $250,000 mark for first-time buyers.
“The dismal number of listings in the affordable price range is squeezing prospective first-time buyers the most,” said Yun.
“As a result, young households are missing out on the wealth gains most homeowners have accrued from the 41 percent cumulative rise in existing home prices since 2011.”
NAR uses a large national sample of signed residential property sale contracts to build its monthly pending home sales index. The sample size typically represents about 20 percent of transactions for existing-home sales.
The index level was benchmarked to 100 in 2001, which was the first year to be examined. Existing-home sales in 2001 were in the 5 million to 5.5 million range, which is considered normal for the population in the U.S.