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Pending home sales flag in October


Existing-home sales heated up in October, but the latest data on contract signings suggests the U.S. housing market will go back into a freeze this winter.  

Pending home sales fell in October and ran behind last year’s pace for the tenth straight month, according to the National Association of Realtors (NAR).

mortrate(1)The trade group’s pending home-sales index fell 2.6 percent over the month to a level of 102.1, and declined 6.7 percent compared to October 2017. The index is based on contract signings and is an indicator of future existing-home sales. Year over year, pending sales were down in all regions, with the West experiencing the greatest slowdown.

Recent data has generally pointed to a slowing of the housing market. In a rare bit of positive news this month, NAR’s existing-home sales reading ticked up slightly in October to an annualized pace of 5.22 million, following six straight months of declines, however. Existing-home sales were still running behind the October 2017 pace, though.

NAR Chief Economist Lawrence Yun blamed the reduced contract activity on rising rates, which he said have reduced the pool of buyers. He noted, however, that rates are still low by long-run averages. Short-term, Yun said the uptick in rates is creating uncertainty, but he was optimistic that sales will eventually rebound.

“There are more jobs today than there were two decades ago,” Yun said. “So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty.”

Yun said he hoped that the Federal Reserve eases back on plans to raise rates, but he expects that interest rates are probably going to increase even further. 

Mortgage Bankers Association Chief Economist Mike Fratantoni said the market's recent cooling pattern was good news.

“Home prices had galloped ahead of wage growth for too long, particularly in the coastal markets,” Fratantoni said. “Now, with the job market quite strong, and sellers recalibrating how aggressive to be with list prices, the housing market is seeking to find its footing.”

Fratantoni said that inventory remains tight, but the overall market fundamentals are in good shape. “We expect the pause in activity to end next year,” he added. 


 

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