Following a decline in November, pending home sales decreased in December to its lowest level since early 2014. The decline occurred despite hopes for stabilization with lower rates.
The Pending Home Sales Index (PHSI), reported by the National Association of Realtors (NAR), is a forward-looking indicator based on signed contracts. The PHSI decreased 2.2% from 101.2 in November to 99.0 in December, and was 9.8% below the level one year ago, making the twelfth straight month of decreases on an annualized basis.
According to NAR, the decline in the PHSI may have resulted from concerns over stock market volatility, housing affordability and higher mortgage rates in October and November.
Despite monthly fluctuations, there has been a downward trend for pending home sales over the past 12 months, with sales lower compared to a year ago.
Regionally, the December PHSI rose 2.0% and 1.7% in the Northeast and the West, but decreased 0.6% and 5% in the Midwest and the South. Year-over-year, the PHSI declined in all regions, ranging from a decline of 2.5% in the Northeast to 13.5% in the South.
Existing sales unexpectedly fell to the 3-year low in December, but builder confidence rose by two points in January due to the gradual decline in mortgage rates. Despite the soft pending home sales in December, with the potential rise in inventory and the change in the stance of monetary policy, NAR expected an improvement of the housing market in 2019. NAHB is forecasting a limited decline for existing home sales in 2019.