Contract signings to purchase previously-owned U.S. homes unexpectedly fell by the most since January, reaching the lowest level since mid-2014 amid mounting evidence that the housing market is struggling.
Higher mortgage rates have worsened the affordability of home ownership and dampened enthusiasm among would-be buyers.
The National Association of Realtors says that its pending home sales index fell 2.6 percent last month to 102.1. The index based on contract signings has tumbled 6.7 percent from a year ago. Economists polled by Reuters had forecast pending home sales rising 0.5 percent last month.
The housing downturn has corresponded with a jump in mortgage rates that began last year after President Donald Trump's tax cuts led to higher budget deficits and interest rates charged on U.S. Treasury notes, the Associated Press reported.
Pending sales fell in three of four regions, led by a an 8.9 percent slump in the West as the Midwest and South also declined. Signings in the Northeast rose 0.7 percent. The index level of 102.1 was the lowest since July 2014.
While the report is in line with the view that housing isn’t expected to collapse, the industry may have trouble gaining traction. Previously-released data showed new home sales fell in October to the weakest pace since March 2016, while purchases of previously owned houses rose for the first time in seven months.
Home resales rose 1.4 percent in October from the prior month but were down 5.1 percent from a year earlier, the sharpest 12-month drop since July 2014.
Pending sales are a barometer of home purchases that are completed a month or two later.
The results underscore the challenges as elevated prices and rising mortgage rates are keeping more Americans on the sidelines of the housing market, Bloomberg explained.
The recent rise in mortgage rates has “reduced the pool of eligible homebuyers,” Lawrence Yun, NAR’s chief economist, said in a statement.
While the job market looks strong, making long-term prospects look solid, “we just have to get through this short-term period of uncertainty.”
Material from AP, Bloomberg and Reuters were used in this report.
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