US pending home sales increased by 2.2% in November 2024, with the Midwest, South and West regions of the United States seeing monthly gains in transactions, while in the Northeast, they declined. On a year-on-year basis, contract signings increased in all four regions, with the West leading the group. According to National Association of Realtors chief economist Lawrence Yun, “Consumers seem to have recalibrated their expectations on mortgage rates and are taking advantage of more available inventory. Buyers no longer wait or expect mortgage rates to drop dramatically”.
Home buyers frustrated by high financing costs got a short-term respite in late summer when mortgage prices hit a two-year low. This has spurred a wave of home purchases that lasted until October, although prices are starting to rise again.
Lawrence Yun, chief economist at the National Association of Realtors, said in a statement: “The momentum for home purchases is building after nearly two years of pent-up home sales. Even as mortgage rates rise modestly despite the Fed’s decision to cut its short-term interbank lending rate in September, ongoing job additions and more housing inventory are bringing more consumers to market.”
Outstanding sales indices rose across all four regions in the U.S., led by a 4.7% increase in the Northeast to the highest level since early last year. The south rose slightly despite hurricanes that hit the southeast in late September and October.
Supply of previously owned homes rebounded to a four-year high – even if still well below pre-pandemic levels.
However, affordability remains a challenge. Economists now expect mortgage rates to remain higher for longer, with the Fed taking a more gradual approach to cutting interest rates amid stubborn inflation.
Factors Influencing the Monthly US Pending Home Sales Report
There are several key factors that may affect the US pending home sales report each month:
Economic conditions: The overall state of the economy, including factors such as GDP growth, employment rates, inflation, and consumer confidence, can affect pending housing sales. A strong economy generally leads to higher housing sales.
Interest rates: Mortgage rates play an important role in the housing market. Fluctuations in interest rates can affect affordability of housing and affect buyers’ decisions to conclude contracts for pending sales.
Housing market supply: The availability of housing stock can affect pending housing sales. Limited supply can increase competition among buyers, which can lead to higher prices and affect sales volumes.
Demographics: Factors such as population growth, household formation trends, and demographic shifts can affect housing demand, affecting pending housing sales figures.
Government policies: Housing-related policies, such as tax incentives for homebuyers, mortgage lending regulations, and government programs aimed at boosting home ownership, can affect pending home sales.
Seasonal factors: The housing market often experiences seasonal fluctuations, with sales rising during the spring and summer months. Weather conditions and holidays can also affect home buying activity.
Consumer sentiment: Consumer confidence and sentiment regarding the housing market and the economy in general can affect the decision-making process of potential home buyers.
Labor market: Labor market health, including employment rates and income levels, can affect individuals’ ability to buy homes and enter into pending sales contracts.
By looking at these key factors, analysts and investors can better understand the trends and fluctuations in the pending home sales report each month and predict how these factors will affect the housing market in the future.
Comparison of monthly US pending housing sales with other housing market indicators
Pending housing sales data is a key indicator in the housing market landscape.
Here’s how it compares to other housing market indicators:
Existing Home Sales: Existing housing sales data reflects the actual number of completed transactions for previously owned homes. On the other hand, pending home sales represent contracts signed but not yet closed. Pending home sales can be an indicator of future existing housing sales activity.
New Home Sales: New home sales data tracks the number of newly built homes sold over a specific period. Pending home sales can provide insights into future demand for new homes, as higher pending sales may indicate potential growth in new home sales.
Housing start-up: Housing start-up data measures the number of new residential construction projects that started during a given period. Pending housing sales can provide indications of future demand for housing start-ups, as a strong pending sales report may indicate increased demand for new construction.
House Price Indices: House price indices, such as the Case Schiller Index, track changes in house prices over time. Pending home sales data, although not directly related to home prices, can influence pricing trends. Higher pending sales may lead to increased competition and higher potential prices in the future.
Mortgage applications: Mortgage application data provides insights into the current mortgage demand for home purchases and refinancing. Pending home sales figures can affect mortgage application trends, as a strong pending sales report may lead to an increase in mortgage applications.
By looking at how pending home sales data compares and interacts with other housing market indicators, analysts, policymakers and investors can gain a more comprehensive understanding of the dynamics within the real estate market and make informed decisions based on a broader perspective of the housing sector.
