WASHINGTON – Slightly more people signed contracts in November to buy homes — with pending sales rising just 0.2 per cent as the housing market copes with a dwindling supply of properties on the market.
The National Association of Realtors said Wednesday that its index of pending home sales was 109.5 in November. The modest increase follows a 3.5 per cent increase in October.
More Americans are shopping for homes as the economy has improved. The low 4.1 per cent unemployment rate has helped lift demand from would-be homebuyers, as the slow recovery from the 2008 financial crisis has built up momentum after years of steady but unspectacular gains. Yet the demand has done little to bring more home-sellers into the market, causing a shortage of listings that has pushed up prices and spawned a rush to buy in many metro areas.
In November, the number of signed contracts rose in the Northeast and Midwest but slumped in the South and West.
Pending sales contracts are a barometer of future purchases. Sales are typically completed a month or two after a contract is signed.
The pending sales index has improved just 0.8 per cent over the past year, as would-be buyers are finding that fewer homes are being listed for sale.
The number of homes listed for sale has dropped nearly 10 per cent over the past year, the Realtors said earlier this month. Many homeowners are choosing to build up their equity or find themselves unable to afford another house if they sell their current residence. This dynamic has contributed to a 6.2 per cent jump in home prices over the 12 months, according to the S&P CoreLogic Case-Shiller index.
With home prices rising faster than incomes, it’s leading to the risk that people seeking homes could be priced out of the market. This, in turn, has caused homes to remain on the market for fewer days.
Some of the financial pressures from rising home prices have been minimized by cheaper borrowing costs.
Mortgage giant Freddie Mac said last week that the rate on 30-year fixed-rate mortgages averaged 3.94 per cent, down from 4.30 per cent a year ago.