Today's Report (12/29/2021)
Pending home sales slipped in November, receding slightly after a previous month of gains, according to the National Association of Realtors. Each of the four major U.S. regions witnessed contract transactions decline month-over-month. Year-over-year activity mostly retreated too, as three regions reported drops and only the Midwest saw an increase.
The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, fell 2.2.% to 122.4 in November. Year-over-year, signings slid 2.7%. An index of 100 is equal to the level of contract activity in 2001.
"There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices," said Lawrence Yun, NAR's chief economist. "While I expect neither a price reduction nor another year of record-pace price gains, the market will see more inventory in 2022 and that will help some consumers with affordability."
Yun notes that housing demand continues to be high, explaining that homes placed on the market for sale go from "listed status" to "under contract" in approximately 18 days.
"Buyer competition alone is unrelenting, but home seekers have also had to contend with the negative impacts of supply chain disruptions and labor shortages this year," he said. "These aspects, along with the exorbitant prices and a lack of available homes, have created a much tougher buying season."
What Is It?
The National Association of Realtors (NAR) Pending Home Sales Report measures the change in the number of homes under contract to be sold but still awaiting the closing transaction. The report excludes new construction.
What Are The Fundamental Effects?
If there are more pending home sales, it can show that consumers are more confident and are able to buy homes, take out mortgages and borrow more money to cover the costs. However, if the figure comes in lower than expected, it can show consumers are not confident to spend money on previously owned single-family homes.
How Does It Affect The Markets?
CURRENCY - It can generate some volatility for the dollar. A higher than expected reading is generally bullish for the dollar.
STOCKS - A higher than expected reading is taken as a good sign for stocks, as consumers are viewed as more confident in their spending, which could lead to higher stock prices.
BONDS - Reaction is generally muted unless the economy is edging closer to overdrive and faces an eruption of inflation pressures. A higher than expected reading is taken a bad sign for bond investors, as it can lead to lower bond prices and higher yields.