Did prospective homebuyers not know that interest rates fell from just over 5% in mid November to 4.61% by the end of December 2018?
Or…did December’s stock market volatility and continued weak affordability matter more to prospective buyers than interest rates? Realtors seem to think so.
Whatever the cause, December’s housing bottom line turned out to be -2.2% fewer contracts to buy existing homes, according to the National Association of REALTORS®, and -9.8% fewer pending home sales compared with December 2017.
Lawrence Yun, Realtor’s chief economist, summarized the reasons for the twelfth straight month of annual sales declines and the lowest sales levels since 2013 by saying, “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 2018.”
Yun did not point to the partial government shutdown as having a causal effect on sales declines but did warn that another shutdown (possible if Congressional leaders and the President do not reach a compromise on border security by February 15) would “…lead to fewer homes sold.”
Looking at the country by its four regions, here are the month/month and annual breakdowns of pending sales in December 2018:
- Northeast – pending home sales +2.0% month/month and -2.5% below one year ago
- Midwest – pending home sales -0.6% month/month and -7.2% below one year ago
- South – pending home sales -5% month/month and -13.5% below one year ago
- West – pending home sales +1.7% month/month and -10.8% below one year ago
The industry continued to be plagued by a tight supply of entry-level homes for sale, very low levels of new construction and seemingly constant affordability challenges.
The supply of homes for sale slightly increased in December but that inventory growth consisted primarily of move-up and luxury homes.