U.S. home sales slow

Pending contracts decline to lowest level in nearly a year

A strong year of home buying in the United States slowed a little in November, but industry professionals don’t foresee an extended slowdown.

The National Association of Realtors reported Wednesday that pending home sales fell in November to their lowest level in nearly a year as an uptick in mortgage rates after the election and tight inventories kept potential home buyers on the sidelines. Only the Northeast region of the U.S. saw monthly and annual pending sales gains last month.

The Realtor organization’s Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 2.5% to 107.3 in November from 110.0 in October.

The small bump in mortgage rates — to 3.77% with 0.5 points in November from 3.47% and 0.6 points in October, according to mortgage buyer Freddie Mac — may not have had as big of a role in the decline as did the difficulty finding good houses for sale, which has been a year-long issue, said economist David Clark.

“I don’t think that we’re in a situation right now where there are a lot of warning bells going off,” said Clark, a Marquette University economics professor who analyzes sales data monthly for the Wisconsin

Realtors Association. “I think if in a year’s time (mortgage rates are) up a full percent, that will likely have a more noticeable impact on activity. I do suspect that the inventory situation is one of the things keeping pending sales down.”

Wisconsin real estate professionals have said throughout 2016 that sales would be higher if there were more homes on the market. Still, through the first 11 months of the year statewide, sales of existing homes were up 5.9% compared with the same period in 2015.

“I do think that in large part — those November (pending sales) being down — the majority of it really is the lack of inventory,” said Beth Jaworski of Shorewest Realtors, who noticed a brief slowdown in November. “I have so many buyers that would love to be in their new home right now.”

Especially hard to find in many communities, she said: “The elusive threebedroom, two-bath, twocar garage in good shape.”

The shortage of homes for sale is pushing up prices. Through November, the median sale price for an existing home in Wisconsin was $165,000, a 5.4% increase from $156,500 at the same time last year.

Lawrence Yun, chief economist for the national Realtors organization, said the impact of higher rates will be partly neutralized by stronger wage growth as a result of the 2 million net new job additions expected next year.

“Healthy local job markets amidst tight supply means many areas will remain competitive with prices on the rise. Those rushing to lock in a rate before they advance even higher will probably have

few listings to choose from,” Yun said in the National Association of Realtors report. “Some buyers will have to expand the area of their home search or be forced to delay in order to save a little more money for their down payment.”

Existing sales are still expected to close out 2016 at a pace of around 5.42 million, which will eclipse 2015 (5.25 million) as the highest since 2006 (6.48 million), the Realtors group said. In 2017, sales are forecast to grow roughly 2% to around 5.52 million. The national median existing-home price is expected to increase around 5% this year and 4% in 2017.

“Much more robust new home construction is needed to relieve inventory shortages and lessen the affordability pressures present throughout the country,” Yun stated. Paul Gores can be reached at paul.gores @jrn.com