Pending home sales index drops

High prices, low supply seen as main culprit for 2.2% decline

A gauge of U.S. pending home sales unexpectedly fell in November as high prices and low inventory restrict home buying.

The National Association of Realtors’ index of pending home sales decreased 2.2% from a month earlier to 122.4, according to data released Wednesday, more than all estimates in a Bloomberg survey. An index of 100 is equal to the level of contract activity in 2001.

The figures suggest the housing market is easing toward the end of a year that’s been buoyed by strong demand and low borrowing costs. However, high prices and limited inventory are weighing on activity.

“There was less pending home-sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices,” Lawrence Yun, the association’s chief economist, said in a statement.

Contract signings retreated across all four regions from the previous month. The Midwest posted the largest decline, falling 6.3%, the most since February.

Compared with a year earlier, contract signings were down 2.7% on an unadjusted basis.

A separate report last week showed that sales of previously owned U.S. homes increased for a third straight month in November. The pending home-sales data are often seen as a leading indicator of existing home sales given that they typically go under contract a month or two before they’re sold.

Unlike existing home sales, which are calculated when a contract closes, the index of pending home sales is based on contract signings.

“Buyer competition alone is unrelenting, but home seekers have also had to contend with the negative impacts of supply-chain disruptions and labor shortages this year,” Yun said.