In addition to a bitterly cold winter sweeping much of the nation, rapidly rising home prices continue to cause affordability issues for the housing market. Pending home sales in the United States fell last month to reach their worst level in more than two years.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, plunged 8.7 percent to 92.4 in December from a downwardly revised 101.2 in November, according to the latest report from National Association of Realtors. On average, economists expected sales to edge higher by about 0.3 percent. It was the lowest reading for the index since October 2011 and 8.8 percent below from a year earlier.
“Unusually disruptive weather across large stretches of the country in December forced people indoors and prevented some buyers from looking at homes or making offers,” said Lawrence Yun, the National Association of Realtors’ chief economist, in a press release. “Home prices rising faster than income is also giving pause to some potential buyers, while at the same time a lack of inventory means insufficient choice. Although it could take several months for us to get a clearer read on market momentum, job growth and pent-up demand are positive factors.”
Home prices have been experiencing double-digit percentage gains on a year-over-year basis in many parts of the country while wages grew only 1.8 percent last year. Pending home sales in the Midwest and South declined 6.8 percent and 8.8 percent, respectively. Sales in the Northeast plunged 10.3 percent and are 5.5 percent below a year ago. The West, which was not impacted by the cold weather but has been logging some of the strongest price gains in the country due to low inventory levels, posted a 9.8 percent drop in pending home sales.
The National Association of Realtors expects total existing-home sales this year to total around 5.1 million units. In 2014, sales are “likely” to hold even. Meanwhile, the national median existing-home price is expected to slow to a more reasonable 5.4 percent gain in 2014 and grow another 4 percent in 2015.
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