Pending home sales declined in December for third month
Contract signings to purchase previously owned homes unexpectedly fell for the third straight month in December, yet another sign the housing market is struggling amid elevated property prices and borrowing costs.
The index of pending home sales fell 2.2%, after a 0.9% decline the previous month, according to data released Wednesday from the National Association of Realtors in Washington. That compared with the median projection of analysts for an increase. The gauge was down 9.5% from a year earlier, the worst drop since early 2014.
While the figures suggest the housing market was weak at the end of 2018, a recent decline in mortgage rates is likely to give a lift to demand at the start of this year, as home-loan applications have jumped this month. Buyers balked in December amid high prices, scarce supplies and uncertainty stemming from stock-market swings and the partial government shutdown.
Pending home sales are regarded by economists as a leading indicator because they track contract signings; purchases of existing homes are tabulated when deals close, typically a month or two later. Federal Reserve policymakers later Wednesday will conclude a two-day meeting, where they're expected to leave interest rates unchanged, and investors expect no hikes in 2019 following four last year.
Steady benchmark rates may help keep a lid on mortgage costs in coming months. Even so, the Realtors group forecasts a decline in annual home sales to 5.25 million this year from 5.34 million in 2018, which would mark the first back-to-back drops since the last recession.
"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," NAR Chief Economist Lawrence Yun said in a statement. But with mortgage rates declining recently and the Fed less likely to raise borrowing costs, "the forecast for home transactions has greatly improved."
Contracts fell from the prior month in three of four regions, led by a 5% drop in the South. Agreements increased 1.7% in the West. The NAR forecasts the median price of existing homes will rise 2.2% in 2019, an eight-year low and down from 4.8% in 2018.