December 30th, 2013 5:17 PM by Jackie A. Graves, President
Pending home sales technically rose slightly in November, but only after a negative downward revision to October's Pending Home Sales Index (PHSI) from the 102.1 originally reported to 101.5. That marked the lowest level in more than a year and a half, and substantial drop from May's 111.3. Today's reading of 101.7 is 1.6 percent lower than in November 2012 when it was 103.3.
The Index is a forward looking indicator based on home purchase contract signings. Completed sales are usually expected within two months of contract signing.
Lawrence Yun, NAR chief economist, said the market is flattening. "We may have reached a cyclical low because the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014," he said. "Although the final months of 2013 are finishing on a soft note, the year as a whole will end with the best sales total in seven years."
Yun said the market still favors buyers in most of the country, but higher mortgage interest rates in combination with strong price gains mean a more modest growth in values is expected in 2014.
Increases in activity in the South and West offset declines in the Northeast and Midwest. The Index in the Northeast declined 2.7 percent to 82.6 in November, but is 1.9 percent above a year ago. In the Midwest the index fell 3.1 percent to 100.6 in November, but is 0.4 percent higher than November 2012. Pending home sales in the South rose 2.3 percent to an index of 116.1 in November, and are 0.1 percent above a year ago. The index in the West increased 1.8 percent in November to 95.0, but is 8.7 percent below November 2012, in part from inventory constraints.
NAR projects that the year will end with total existing-home sales of 5.1 million, a gain of almost 10 percent over 2012. Sales in 2014 are expected to remain around that same level but will rise to 5.3 million in 2015.
The national median existing-home price in 2013 is forecast to reflect nearly a 12 percent increase to $197,300. It is also expected to level off and rise at a more moderate pace of 5 to 5.5 percent in 2014 followed by 4 percent growth in 2015.
The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined and is generally considered to be a typical year for home sales.