Higher prices and limited inventory can slow the dynamics of the real estate market despite historically low borrowing costs.
A gauge of pending home sales in the United States fell for the third straight month in November, suggesting that higher prices and limited inventory are slowing real estate market momentum despite record borrowing costs.
The National Association of Realtors’ contract signing index for the purchase of previously owned homes fell 2.6% from the previous month to 125.7, data showed Tuesday. The median estimate from a Bloomberg survey of economists called for no change in November. Compared to a year earlier, pending sales increased 16% on an unadjusted basis.
The index’s decline from the previous month shows more tempered activity in the housing market as prices continue to climb in a meager stock. Still, the pending sales gauge remains well above pre-pandemic levels, indicating continued high demand as buyers seek more space.
“The latest monthly drop is largely due to inventory shortages and rapidly rising home prices,” Lawrence Yun, chief economist of NAR, said in a statement. “The market is incredibly fast this winter, with listed homes on average under contract for less than a month due to a backlog of buyers looking to take advantage of record mortgage rates.”
A separate report last week showed that sales of existing homes, calculated upon closing a contract, fell in November for the first time in six months, highlighting the challenges of growing the housing market as the soaring prices threatened affordability.
Pending home sales declined in all four major regions of the United States. The West’s contract signing gauge fell 4.7% to a four-month low. In the Midwest, pending sales were down 3.1%, while in the South they were down 1.1%.