Wednesday, April 17, 2024

Pending home sales stagnate in November despite rate relief

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November’s numbers show pending sales didn’t move compared to October, but lower rates did apparently lead to more lockbox openings — hinting that better days lie ahead.

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Despite being jam-packed with real estate news, just-released data shows that November saw pending home sales remain flat compared to one month earlier — though the numbers do offer some hints of an improving market.

In total, the National Association of Realtors’ Pending Home Sales Index (PHSI) hit 71.6 in November. That’s the same place the PHSI was at in October. The PHSI is a “forward-looking indicator of home sales based on contract signings,” according to NAR, and a score of 100 would mean that pending sales activity is at the same level it was at in 2001.

NAR’s numbers, released Thursday in a report from the organization, also show that pending sales in November were down 5.2 percent compared to the same period in 2022.

The month-over-month stagnation, and the year-over-year dip, came despite the fact that mortgage rates in November retreated from their October highs. According to data tracked by Optimal Blue, rates peaked on Oct. 25, and have been on a general downward trajectory ever since. In December, a cooling economy has continued to push rates down at a faster pace.

Broken down by region, the PHSI rose in the Northeast by 0.8 percent month over month in November to 64.4. That’s a dip of 6.4 percent year over year. In the Midwest, the PHSI rose 0.5 percent month over month to 76.2, but fell 2.2 percent compared to one year ago. And in the West, the PHSI ticked up 4.2 percent to 54.0, despite falling 4.9 percent relative to November 2022. In the South, the PHSI dipped 2.3 percent to 83.2 in November, while also decreasing 6.5 percent from a year ago.

In other words, three regions saw the PHSI climb slightly month over month, but it was down significantly year over year in every part of the U.S.

All of these numbers came during a month that was filled with big real estate news. Among other things, NAR and other industry players spent the month dealing with the fallout from the Sitzer | Burnett commission lawsuit verdict, NAR CEO Bob Goldberg announced his early retirement, and NAR held its annual conference. It was, in other words, one of the biggest news months for real estate in recent memory.

Though the pending sales numbers paint a somewhat dour picture of the housing market, NAR’s report did offer signs of hope that transactions are actually going to pick up.

Lawrence Yun

“Although declining mortgage rates did not induce more homebuyers to submit formal contracts in November, it has sparked a surge in interest, as evidenced by a higher number of lockbox openings,” Lawrence Yun, NAR’s chief economist, said in Thursday’s report.

Time will tell if higher levels of lockbox openings do indeed translate to more sales, but that would be the rational expectation; sales took a nosedive beginning in 2022 as rates climbed at record speed. A dip in rates, then, ought to bring about the opposite outcome.

And indeed, that’s exactly what Yun predicted for next year.

“With mortgage rates,” Yun said in the report, “falling further in December — leading to savings of around $300 per month from the recent cyclical peak in rates — home sales will improve in 2024.”

Email Jim Dalrymple II

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