The numbers: The index of pending home sales increased 1.2% in November from the previous month, the National Association of Realtors reported Monday. In October, sales had fallen after two consecutive months of increases.
The index records transactions that have not yet closed but where a contract has been signed. As a result, the index serves as an indicator for existing-home sales reports in the coming months.
What happened: Compared with November 2018, contract signings were up 7.4%. The index is benchmarked to contract-signing activity in 2001.
Sales in the West increased substantially by 5.5%, while contract signings only saw marginal changes in the Northeast (down 0.1%), South (down 0.2%) and Midwest (up 1%). When compared with last year, sales were up in all four regions.
Big picture: The positive November data aside, the inventory of homes for sale will remain a challenge. “Despite the insufficient level of inventory, pending home contracts still increased in November,” said Lawrence Yun, chief economist for the National Association of Realtors. “The favorable conditions are expected throughout 2020 as well, but supply is not yet meeting the healthy demand.”
In October, Yun said that the lack of inventory contributed to the downturn in pending sales, arguing that buyers were having a difficult time finding homes available for sale.
While most economists expect home-building activity to gain steam next year, it won’t be enough to fully meet the demand that’s in the market. As a result, home prices should continue to increase at healthy — if somewhat slower — pace.
Mortgage rates are anticipated to remain at their current, historically-low levels in 2020, but that may not be enough to make buying a home affordable for would-be buyers struggling to get enough money together to make a purchase.
Market reaction: The Dow Jones Industrial Average and the S&P 500 fell from record levels Monday morning, while the 10-year Treasury note’s increased.