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Market Recap: New Home Sales Drop, Home Prices Go Up, Pending Home Sales Decline
Posted On March 02, 2018
As expected, mortgage rates continued to trend slightly upward this week. Unseasonably cold winter weather stalled new home sales again this month. The S&P CoreLogic Case-Shiller home price index appreciated month-over-month and year-over-year. The pending home sales index declined.
New home sales, the sales of newly-constructed homes, continued to fall in January, down 7.8% month-over-month, and 1% year-over-year to a seasonally adjusted annual rate of 593,000. The new home sales report tends to be volatile since it is a smaller sample of data than the more comprehensive existing home sales report. Increasing buyer demand continues to impact available housing supply, and brutal winter weather has hurt construction activity for the past two months. However, the outlook for future new home sales is positive. The supply of available new homes on the market increased to 301,000 in January, the first reading above 300,000 since 2009.
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 country. In December, home prices increased 0.7% month-over-month and 6.4% year-over-year. Continued strong demand and dwindling supply have led to sustained home price appreciation for the past few years. Western cities continue to lead home price appreciation, with Seattle, Las Vegas, and San Francisco posting the most significant gains.
The National Association of Realtors’ (NAR) pending home sales index reports on changes in the volume of homes under contract. A pending home sale is a transaction where the contract is signed but not yet closed. In January, pending home sales declined 4.7% month-over-month to a level of 104.6. Every region declined; lack of homes for sale continues to hamper home buying activity.
Tightened inventory is driving home price appreciation and creating a competitive market. NAR chief economist Lawrence Yun explained, “with the cost of buying a home getting more expensive and not enough inventory, some prospective buyers are either waiting until listings increase come spring or are now having to delay their search entirely to save up for a larger down payment.”