Warmer-than-normal temperatures across much of the nation did nothing to heat up home sales in November. Pending home sales, a measure of signed contracts, not closings, fell 0.9 percent compared to an upwardly revised October reading, according to the National Association of Realtors.
They were 2.7 percent higher than November of 2014, but that is the smallest annual increase in over a year and November’s number was the third monthly decline in the past four months.
“Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months despite low mortgage rates and solid job gains,” said Lawrence Yun, chief economist at the National Association of Realtors. “While feedback from Realtors continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers.”
November closings fell a steep 10.5 percent month to month, with Realtors blaming the new “Know Before You Owe” mortgage regulations for delays that may have pushed some closings to December. Pending sales in November would not be affected by the new rules, as they don’t come into play until closing.
Regionally, pending home sales in the Northeast decreased 3.0 percent and are 4.3 percent above a year ago. In the Midwest they rose 1.0 percent for the month and 4.1 percent annually. In the South sales increased 1.3 percent for the month and are 0.5 percent higher than last November. In the West sales declined 5.5 and are 4.5 percent above a year ago.
The housing market continues to be plagued by low inventory, which is pushing home prices higher far faster than income growth. Homes are selling faster today than at the same time last year, according to a December report from Realtor.com, one of the nation’s largest real estate listing companies. Analysts there expect supply to fall 7 percent in December compared to November.
California continues to dominate Realtor.com’s list of “hottest housing markets,” occupying eight of the top 10 spots. Only Dallas and Denver managed to break into that list. Realtor.com compiles the list according to the number of listing views as well as days on market.
“While California closed out our latest ranking still firmly in control of the hottest markets, the Midwest and Florida are both seeing substantial improvement,” said Jonathan Smoke, chief economist at Realtor.com. “Pent-up demand and robust economic growth combined with limited supply will keep the California housing market tight in 2016, but more markets will challenge them as demand improves elsewhere.”
Price will dictate demand, and price gains have been increasing. The success of 2016’s housing market will depend largely on builders and sellers. Both need to step up and add supply, or prices could be in danger of overheating.
The National Association of Realtors is forecasting existing home sales to finish 2015 at a pace of around 5.25 million — the highest since 2006, but roughly 25 percent below the prior peak set in 2005 (7.08 million).