Pending home sales fell again in December to a score of 99.0 on the National Association of Realtors’ (NAR) Pending Home Sales Index.
That’s down 2.2% compared with November and down 9.8% compared with December 2017.
It was the 12th straight month that contract signings fell on a year-over-year basis.
Month-over-month, pending home sales increased 2.0% in the Northeast and 1.7% in the West, however, they fell 0.6% in the Midwest and 5% in the South.
Year-over-year, they fell 2.5% in the Northeast, 7.2% in the Midwest, 10.8% in the West and 13.5% in the South.
Lawrence Yun, chief economist for NAR, says the decline is due to several factors.
“The stock market correction hurt consumer confidence, record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December,” Yun says in a statement.
So far, the partial government shutdown has not caused any obvious damage to home sales.
“Seventy-five percent of Realtors reported that they haven’t yet felt the impact of the government closure,” Yun says. “However, if another government shutdown takes place, it will lead to fewer homes sold.”
As the government reopens, more mortgage options will come available for consumers, Yun says.
“Some home transactions were delayed, but we now expect those sales to go forward,” he says.
Although inventory remains a problem, there are certain markets where more inventory is coming online.
Areas which saw an annual increases in active listings in December include Denver-Aurora-Lakewood, Colo.; Seattle-Tacoma-Bellevue, Wash.; San Francisco-Oakland-Hayward, Calif.; San Diego-Carlsbad, Calif.; and Portland-Vancouver-Hillsboro, Ore.-Wash.
Yun says despite the low home sales in December, he is confident that the housing market will see improvement in 2019.
“The longer-term growth potential is high,” he says. “The Federal Reserve announced a change in its stance on monetary policy. Rather than four rate hikes, there will likely be only one increase or even no increase at all. This has already spurred a noticeable fall in the 30-year, fixed-rate for mortgages. As a result, the forecast for home transactions has greatly improved.”