Market Forecast: Case-Shiller Home Price Index, New Home Sales, and Pending Home Sales
Markets will be closed tomorrow in observance of the Christmas Holiday. Last week, the Federal Open Market Committee voted to raise the Federal benchmark interest rate, as expected. This week will bring some closing housing numbers heading into the end of the year. The S&P CoreLogic Case-Shiller home price index will come out on Wednesday, followed by new home sales on Thursday, and the pending home sales index on Friday.
The Case-Shiller home price index tracks changes in the value of homes involved in two or more sales transactions across twenty major metropolitan areas throughout the United States. After several years of a red-hot housing market, home price appreciation has started to slow. In September, the 20-city index increased 0.3% month-over-month and 5.1% year-over-year.
New home sales, or the sales of newly constructed homes, make up approximately 10% of all residential real estate transactions. In October, new home sales tumbled, down 8.9% month-over-month. Construction activity tends to slow down in the cold winter months due to restrictive weather. Each region struggled, led by the Midwest, down 22.1%. The Northeast was down 18.5%, the South was down 7.7%, and the West was down 3.2%.
The pending home sales index tracks homes that are under contract but not yet closed. Typically, it takes four to six weeks for a contract to close. Pending home sales are used to predict future housing market activity. In October, pending home sales declined 2.6% month-over-month to a level of 102.1. National Association of Realtors (NAR) chief economist Lawrence Yun explained, “the recent rise in mortgage rates have reduced the pool of eligible home buyers. However, mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent. Additionally, there are more jobs today than there were two decades ago."
Forecasters are predicting a slower housing market in 2019, and that could give home buyers who missed their opportunity in 2018, a chance to buy. Even with the recent rate hike, home price appreciation has started to slow down. With less buyers on the market, next year’s home buyers will likely have more options when shopping for new homes.
Sources: CNBC, CNBC, Econoday, MarketWatch, Mortgage News Daily, the Wall Street Journal