With an upswing in mortgage rates and a lack of inventory dispiriting some would-be homebuyers, the National Association of Realtors released a report on Wednesday unexpectedly showing a sharp pullback in U.S. pending home sales in the month of November.
NAR said its pending home sales index tumbled by 2.5 percent to 107.3 in November after inching up by 0.1 percent to a revised 110.0 in October.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
The steep drop in pending home sales came as a surprise to economists, who had expected pending sales to climb by 0.5 percent.
With the unexpected decrease, the pending home sales index plunged to its lowest level since hitting 105.4 in January.
"The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election," said NAR chief economist Lawrence Yun.
He added, "Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract."
The report showed a notable decline in pending home sales in the West, where pending sales slumped by 6.7 percent during the month.
Pending home sales in the Midwest and South also fell by 2.4 percent and 1.2 percent, respectively, while pending sales in the Northeast rose by 0.6 percent.
Yun said higher borrowing costs somewhat cloud the outlook for the housing market but noted the impact of higher rates will be partly neutralized by stronger wage growth.
NAR said existing sales are still expected to close out 2016 at a pace of around 5.42 million, which would be the highest since 2006.
In 2017, sales are forecast to grow roughly 2 percent to around 5.52 million, NAR said, while the national median existing-home price is expected to increase by around 4 percent.
by RTT Staff Writer
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