Pending Home Sales Fall For 6 Consecutive Months, Nearly Hitting 20-Year Lows: What You Need To Know

A four-week lagging (and leading) indicator which tracks mid-stage pending housing transactions edged lower in November, marking the sixth-straight month of declines, plummeting near pandemic lows.

What Happened: Data issued by the National Association of Realtors (NAR) on Wednesday showed pending home sales — when a seller has received and accepted an offer on their home — had edged lower across all four U.S. housing market regions.

November also marked the second-lowest reading in 20 years, as soaring mortgage and interest rates negatively affect affordability.

NAR's Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, fell 4.0% to 73.9 in November. According to Reuters, aside from the early days of the COVID-19 pandemic, November was the lowest reading since the index was started in 2001.

The following are the November 2022 PHSI statistics, by region:

• The Northeast slipped 7.9% to 63.3, a drop of 34.9% from November 2021.
• The Midwest decreased 6.6% to 77.8, a fall of 31.6% from one year ago.
• The South retracted 2.3% to 88.5, down 38.5% from the prior year.
• The West dropped by 0.9% in to 55.1, retreating 45.7% from November 2021.

Read Also: Economist Says Housing Turnover Will Drop To Its Lowest Rate In 40 Years

“We expect more downside in housing, but so far, we do not see the same level of risk as the Great Financial Crisis,” said Jeffrey Roach, chief economist for LPL Financial in a note Wednesday. “Housing activity will slow further from here but we do not expect a significant rise in foreclosures.”

Why It Matters: The housing market slowed at a rate not seen since the 2008 financial crisis as a result of the Federal Reserve's efforts to control inflation.

While there were early but promising signs inflation was cooling, which caused mortgage rates to drop last week, rates were still at 14-year highs, sidelining those would-be home buyers.

Roach expected more downside in the housing market heading into 2023, saying low pending home sales should inform investors that “we have not likely seen the bottom.”

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