Fall in pending home sales likely indicates cooling of US housing market

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 31, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - Contracts to purchase previously owned U.S. homes fell in November. The fall in figures for the third time in four months, signified cooling of the US housing market. Markets had expected pending home sales to rise 0.5 per cent after having risen 0.2 per cent in October. The National Association of Realtors (NAR) yesterday reported its pending home sales index slipped 0.9 per cent to 106.9 in November, the lowest since January.

    Contracts fell 3 per cent in the Northeast in November from a month earlier while it fell 5.5 per cent in the West. However contracts increased 1.3 per cent in the South and gained 1.0 per cent in the Midwest.

    NAR chief economist Lawrence Yun noted “Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months”. He also said in a statement that “Available listings that are move-in ready and in affordable price ranges remain hard to come by.”

    Also, home re-sales, which make up more than 90 per cent of the housing market, declined 10.5 per cent in November, their lowest level since April 2014. The Realtors’ group is aware that change in industry rules have lengthened the time it took buyers to close on a deal. However these changes should not have affected contract signings.

    The declines in pending home contracts in recent months likely means growth in home buying will drop in 2016 given that the interest rates are also expected to rise. Mortgage rates have only increased since the benchmark rate was raised by a quarter point on 16th December by the Fed.

    Pending home sales were still up 2.7 per cent from a year ago. As compared with the figures registered a year earlier, the pending home sales index increased 5.1 per cent on an unadjusted basis. However the current figures imply that the housing sector lost momentum as the year drew to a close. Thomas Costerg, a senior U.S. economist at Standard Chartered Bank in New York feels “There is some softness creeping into the housing market”.
    Sales of existing homes had also slumped in November. Real-estate agents’ group had blamed new mortgage-lending rules that delayed closings. Moreover it is also believed that rising prices and a short supply of properties are restricting sales. These factors are contributing towards a slower recovery in the housing market.

    There continues to remain a glimmer of hope. Conditions for sustained gains in home demand continue to exist. Hiring is strong. Also, mortgage costs are at record low levels. Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina is confident that “The housing market is still positioned for gradual improvement in 2016”. Sam Bullard feels “Fundamentally, the situation is still favorable.” NAR’s Yun echoed the sentiment of Bullard when he too said that there will be “healthy levels of buyer interest” as mortgage rates hiring can be expected to remain “solid” and mortgage rates low.
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