The number of contracts to purchase a home fell in November for the sixth consecutive month as the slowdown in sales turned into a deep freeze, the National Association of Realtors reported on Wednesday.
The number was well below estimates for a drop of between 1% and 2% and comes after October’s 4.6% drop. On an annual basis, sales are now 37.8% below where they were a year ago.
“Pending home sales recorded the second-lowest monthly reading in 20 years as interest rates, which climbed at one of the fastest paces on record this year, drastically cut into the number of contract signings to buy a home,” said NAR Chief Economist Lawrence Yun. “Falling home sales and construction have hurt broader economic activity.”
Rising mortgage rates and tight inventory have dampened sales demand for homes, both existing and new, although mortgage rates have dipped slightly in recent weeks. But as sellers have pulled back on listing their homes and buyers try to see if mortgage rates will fall lower, the market has stalled. Prices, meanwhile, have begun to rise at a much lower rate than they did earlier in the year.
“With prices for existing homes still elevated – even with the 10.4% decline from June’s peak – and mortgage rates above 6%, homebuyers are finding much of today’s real estate landscape inaccessible,” Realtor.com Senior Economist George Ratiu wrote ahead of the release.
Throughout the coronavirus pandemic, housing became the hottest sector of the economy as Americans moved out of the cities to places where they could enjoy the lockdowns. But that trend has reversed itself, to a degree, while sharp increases in home prices have priced many would-be buyers out of the market.
The rise in mortgage rates is a direct result of the Federal Reserve’s campaign to hike interest rates to a level considered “restrictive” as a way to deter inflation. So far, the Fed has maintained its nerve even as the economy and inflation have both slowed. The Fed’s monetary policy committee meets again in February, when most observers expect it will raise rates by 25 to 50 basis points.