November can’t sustain pending home sales momentum
Pending home sales had increased in October, but dropped in November, highlighting the concerns about low housing inventory and rising home prices that we’ve seen play out for much of 2021. All four U.S. regions saw a decline, according to the National Association of Realtors® (NAR).
The Pending Home Sales Index, an indicator of future home sales based on contract signings was at 122.4—2.2% lower than October. Year-over-year, November 2021 pending home sales activity retreated as well, as signings were down 2.7% from November 2020. An index of 100 is representative of the level of contract activity in 2001.
"There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices," said Lawrence Yun, NAR's chief economist.
"Buyer competition alone is unrelenting, but home seekers have also had to contend with the negative impacts of supply chain disruptions and labor shortages this year," Yun went on. "These aspects, along with the exorbitant prices and a lack of available homes, have created a much tougher buying season."
Looking towards 2022
The effects of the omicron variant of the COVID-19 virus are just starting to show up in these November results. Nearly a month after the variant was widely detected, it is now much more prevalent in the U.S. and cases of COVID-19 are spiking nationwide. This poses risk to the housing market, as buyers and sellers wait on the sidelines and home construction slows down.
Despite these concerns, Yun has a positive outlook on the housing market in the coming year, however. "While I expect neither a price reduction, nor another year of record-pace price gains, the market will see more inventory in 2022 and that will help some consumers with affordability." He notes that COVID-19 news could derail this performance.
In particular, housing demand continues to be high. Homes that go on the market this month have gone from “listed status” to “under contract” in 18 days, on average.
Activity down across the country
All four regions saw decreases from October, and year-over-year numbers were down as well, except for a slight bump in the Midwest.
- Northeast: down 0.1%—8.5% lower than last year
- Midwest: down 6.3%—0.2% higher than last year
- South: down 0.7%—1.3% lower than last year
- West: down 2.2%—4.6% lower than last year
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