Pending Home Sales Crash 7.7%, Biggest Drop In Four Years

There was some hope for a rebound in US housing indicators, after the recent existing home sales print rebounded, but that was promptly dashed after pending home sales dropped again in November, sliding -0.7% vs the expected 1.0% increase, declining in six of the last eight months, with a cumulative loss since March of -5.9% (-8.9% annualized)...

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...and crashed a whopping 7.7% compared to last year, the biggest annual drop since April 2014.

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This is the worst pending home sales print since June 2014.

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Always eager to put lipstick on a pig, commenting on the collapse NAR chief economist Larry Yun said: "the latest decline in contract signings implies more short-term pullback in the housing sector and does not yet capture the impact of recent favorable conditions of mortgage rates".

Yun added that while pending contracts have reached their lowest mark since 2014, there is no reason to be overly concerned, and he predicts solid growth potential for the long-term.

Not everyone agrees: as Bloomberg notes, the poor results underscore the challenges as elevated prices and higher mortgage rates keep many Americans on the sidelines of the housing market. Economists consider pending-home sales a leading indicator because they track contract signings; purchases of existing homes are tabulated when deals close, typically a month or two later.

Pending home sales fell in the Midwest and South, which both dropped more than 2 percent from the prior month, while the Northeast and West saw increases. At the same time, all four major regions sustained a drop when compared to one year ago, with the West taking the brunt of the decrease. “The West crawled back lightly, but is still experiencing the biggest annual decline among the regions because of unaffordable conditions,” Yun said.

Yun suggests that affordability challenges in the West are part of the blame for the drop in sales. Home prices in the West region have risen too much, too fast, according to Yun. “Land cost is expensive, and zoning regulations are too stringent. Therefore, local officials should consider ways to boost local supply; if not, they risk seeing population migrating to neighboring states and away from the West Coast”.

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