WASHINGTON – Fewer Americans signed contracts to buy homes in November. The decline likely reflects the drag caused by the increase of the mortgage interest and shallow inventory of properties on the market.
The National Association of Realtors said Wednesday that its seasonally adjusted pending home sales index fell 2.5 percent to 107.3, the lowest value since the beginning of 2016. Pending sales declined in the Mid-west, South, and West, while the improvement in the Northeast.
The slowdown means a turnaround for the housing market, such as the sale of the growth has been positive for the past year. Completed sales of existing homes in November rose to the highest pace in nearly a decade, to a seasonally adjusted annual rate of 5.61 million, the Realtors said last week. But pending sales contracts suggest that demand may be weakening now that the cost of the purchase of a house are increased.
Pending sales contracts are a barometer of future purchases. A sale is usually a month or two after a contract is signed.
Mortgage rates began to surge after the Donald Trump of the presidential election to win in November, making it more expensive to purchase a house. Average 30-year fixed-rate mortgages are 4.3 percent last week, against a 52-week low of 3.4 percent, according to mortgage buyer Freddie Mac.
The rising rates could make existing homeowners are less likely to put their property on the market, since it requires them to finance the purchase of a new house in a higher interest rate.
The stocks are already squeezed. Less than 1.9 million homes were on the market in November, a 9 percent decrease from a year earlier. The shortage of listings has increased the prices over the last year.
But higher mortgage rates would leave buyers are reluctant to pay a premium. If the rates go up to 5 percent in the coming year, almost half of the brokers surveyed by the brokerage Redfin said their clients would start looking for cheaper housing.
“A lot of my clients_both buyers and sellers_have concerns and doubts about the increase of the mortgage interest,” said Arto Poladian, a Redfin agent in Los Angeles.