Economic Report: Pending home sales slump again in November as housing market faces big chill

Bloomberg News/Landov

Pending sales of U.S. homes fell again in November, reflecting a prolonged downturn in the housing market tied to higher mortgage rates and home prices.,

The numbers: Pending sales of homes in the U.S. fell again in November to a four-year low in another sign of a widespread weakness in the real estate market that’s likely to continue into 2019.

U.S. pending home sales fell 0.7% to a reading of 101.4 in November from 102.1, the National Association of Realtors said Friday.

One caveat: The latest report was compiled before a sharp drop in interest rates in the past month that have made mortgages a bit cheaper to obtain.

What happened: How big is the slowdown in home sales? NAR’s index, which tracks real estate contract signings, is down 7.7% compared to a year ago.

Contract signings usually precede closings by about 45 days, so the pending home sales release is considered a leading indicator for the existing-home sales report.

In November, pending sales rose 2.8% in the West and 2.7% in the Northeast, but they declined 2.3% in the Midwest and 2.7% in the South.

Sales are lower in all four regions compared to a year ago, however.

Big picture: Home sales and construction have taken a big hit from rising U.S. interest rates while a shortage of skilled trade people has hampered builders. There’s still plenty of people who want to buy a home, but prices remain relatively high and an increase in mortgage rates hasn’t helped.

Lawrence Yun, the chief economist of NAR, said an extended government shutdown could reduce sales by as many as 40,000 homes a month because federal flood insurance is temporarily unavailable.

Read: We’re probably at peak housing. Here’s what that means.

Market reaction: The 10-year U.S. Treasury yield TMUBMUSD10Y, -1.27%   has retreated in recent weeks, falling to 2.75% from a seven-year high of almost 3.25% nearly two months ago. The decline still doesn’t put mortgage rates back to where they were a year ago, but it might help goose house sales a bit.

The Dow Jones Industrial Average DJIA, -0.01% and S&P 500 SPX, -0.01% rose modestly in early Friday trade, building on a strong rally that began with a huge 1,000-point gain in the Dow two days ago.

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