Pending home sales eked out a small increase in November on both a monthly and annualized basis. The increase was enough to make it the highest gain in contract signings since June as well, the National Association of REALTORS® reported Wednesday.
But will it last? Existing-home sales and price growth are expected to slow heading in 2018 due to the impact from altered tax benefits of homeownership affecting some high-cost areas, according to NAR.
NAR’s Pending Home Sales Index—a forward-looking indicator based on contract signings—inched up 0.2 percent month over month. NAR’s index reached a reading of 109.5 in November and is at its highest reading since June (110). The index is 0.8 percent higher than a year ago.
“The housing market is closing the year on a stronger note than earlier this summer, backed by solid job creation and an economy that has kicked into a higher gear,” says Lawrence Yun, NAR’s chief economist. “However, new buyers coming into the market are finding out quickly that their options are limited and competition is robust. REALTORS® say many would-be buyers from earlier this year, stifled by tight supply and higher prices, are still trying to buy a home.”
Existing-home sales are up 5.8 percent—more than double wage growth. Inventories remain tight at a 3.4-month supply of homes on the market, which is the lowest since NAR began tracking in 1999.
“The strengthening economy, and expectation that more millennials will want to buy, serve as promising signs for solid homebuying demand next year, while also putting additional pressure on inventory levels and affordability,” Yun says. “Sales do have room for growth in most areas, but nationally, overall activity could be slightly negative. Markets with high home prices and property taxes will likely feel some impact from the reduced tax benefits of owning a home.”
Yun forecasts that existing-home sales will finish 2017 at around 5.54 million, which is an increase of 1.7 percent from 2016 (5.45 million). The national median existing-home price for 2017 is expected to increase to around 6 percent.
Yun projects that in 2018, existing-home sales will see little change, declining just 0.4 percent to 5.52 million. He also forecasts that price growth will moderate to around 2 percent.
Source: National Association of REALTORS®