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Pending Home Sales Index sees steepest decline since June 2014
HOUSTON, December 7, 2018 (PCW) -- The Pending Home Sales Index fell 2.6% in Oct on a month-over-month basis against an expected gain of 0.5%, according to data from the National Association of Realtors (NAR). The index slumped 6.7% from Oct 2017. This was the tenth consecutive month of declines in pending home sales and the steepest since Jun 2014. The biggest drop was recorded in the West (-15.3%), followed by the Midwest (-4.9%), South (-4.6%) and Northeast (-2.9%).
The NAR released an updated read on the pending home sales index this week. The Index, a leading indicator of housing activity, measures housing contract activity and is based on signed real estate contracts for existing single-family homes, condos and co-ops. Because a home goes under contract a month or two before it is sold, the pending home sales index generally leads existing home sales by a month or two.
Existing home sales represent roughly 90% of the residential housing transactions. That means these reductions are a potentially troubling sign, suggesting the trend in the housing market is set to continue lower. Lawrence Yun, NAR's chief economist, blamed the slowdown on a combination of higher mortgage rates and elevated home prices, saying that the recent rise in mortgage rates has reduced the pool of eligible homebuyers. -- Donna Todd