Pending home sales fell at the end of 2018, as consumers became increasingly concerned about the economy and heightened home prices, according to a newly released housing index from the National Association of REALTORS®.
NAR’s Pending Home Sales Index—a forward-looking indicator based on contract signings—decreased 2.2 percent to a reading of 99 in December. Contract signings are down 9.8 percent year over year.
“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,” says Lawrence Yun, NAR’s chief economist.
The record 35-day partial government shutdown that occurred at the end of 2018 and into January has so far not caused any obvious damage to home sales, Yun says. Seventy-five percent of real estate professionals reported they had not yet felt any impact from the government’s closure. “However, if another government shutdown takes place, it will lead to fewer homes sold,” Yun says.
All four major regions of the U.S. posted declines compared to a year ago. The South posted the largest decrease.
But Yun is confident that the low sales in December are poised for a turnaround this year.
“The longer-term growth potential is high,” Yun says. “The Federal Reserve announced a change in its stance on monetary policy. Rather than four rate hikes, there will likely be only one increase or even no increase at all. This has already spurred a noticeable fall in the 30-year, fixed-rate mortgages. As a result, the forecast for home transactions has greatly improved.”