Drop In Pending Home Sales

Rising mortgage rates led to fewer pending home sales

Drop In Pending Home Sales
January 4, 2017

New data from the National Association of Realtors shows that fewer Americans signed contracts to buy property during November. The trend has been largely attributed to mortgage rates continuing to rise, alongside a low inventory of available real estate.

Pending sales contracts are an important index, as they are considered a barometer for future purchases. After a contract is signed, the transaction normally completes within one to two months. In November, the pending home sales index dropped to 107.3, a drop of 2.5 percent. The figure marks a reversal of the positive housing market growth seen throughout 2016. While the number of completed sales for November rose, reaching a seasonally-adjusted level of 5.61 million, the slowdown in pending sales suggests weakened demand.

The rise in mortgage rates not only makes it harder for first-time buyers to afford a property but can impact inventory levels too. This is because anyone thinking of selling their home has to consider the increased costs of financing their new home. Such a scenario led to just 1.9 million properties being listed during November - a fall of 9 percent, compared to the same period a year earlier.

The brokerage firm Redfin surveyed real estate agents for their views on people's buying habits for the continuing year. Almost half of those questioned said that if rates rise beyond 5 percent, buyers would look for cheaper homes. Arto Poladian, a Los Angeles-based Redfin agent, said, "Many of my clients, both buyers and sellers, have expressed concern and hesitation about increasing mortgage rates."

If you are interested in refinancing your home loan, visit the MoneyTips Mortgage Planner.


Photo ŠiStockphoto.com/fstop123

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