Following the post-regulatory-change spike in existing and new home sales, pending home sales disappointed with a mere 0.1% rise MoM (missing expectations of a 0.9% rise). The weakness of the forward-looking indicator of home closings was blamed - as usual - on low inventories but also on "sizable losses in the stock market." The 3.1% YoY sales increase is close to the weakest since November 2014.
Not what New and existing home sales suggest (but more like homebuilder sentiment)
Lawrence Yun, NAR chief economist, says contract activity closed out the year on stable footing but lost some momentum, except for in the Northeast.
"Warmer than average weather and more favorable inventory conditions compared to other parts of the country encouraged more households in the Northeast to make the decision to buy last month," he said. "Overall, while sustained job creation is spurring more activity compared to a year ago, the ability to find available homes in affordable price ranges is difficult for buyers in many job creating areas. With homebuilding still grossly inadequate, steady price appreciation and tight supply conditions aren't going away any time soon."
According to Yun, although healthy labor market conditions will persuade more households to buy, it's possible overall demand could be somewhat curtailed in coming months. The stock market's sizeable losses since the start of the year and the effect slowing manufacturing activity is having in some areas — especially in the energy sector — could cause some to hold off on buying.
"The silver lining from the market turmoil in recent weeks is the fact that mortgage rates have slightly declined," says Yun. "Buyers looking to close on a home before the spring buying season begins may be rewarded with a mortgage rate at or below 4 percent."
The regional breakdown was as follows:
- The PHSI in the Northeast increased 6.1 percent to 97.8 in December, and is now 15.3 percent above a year ago.
- In the Midwest the index decreased 1.1 percent to 103.6 in December, but is still 3.6 percent above December 2014.
- Pending home sales in the South declined 0.5 percent to an index of 119.3 in December but are 1.0 percent higher than last December.
- The index in the West decreased 2.1 percent in December to 97.5, but remains 3.4 percent above a year ago.
So much for the balmy December weather serving as a boost to new housing, and construction jobs.