After New- and Existing-Home-Sales have already disappointed, Pending Home-Sales just collapsed too (to the lowest since Oct 2014) to confirm January was a bloodbath for the real estate market.
Pending Home Sales plunged 4.7% in January (massively below the 0.5% expected rise in sales) - this is the biggest drop since May 2010.
Year-over-year Pending home sales are down 1.7%.
Purchases fell 9 percent in the Northeast, 6.6 percent in the Midwest, 3.9 percent in the South and 1.2 percent in the West.
NAR is desperate to convince home-buyers and sellers that this is nothing but an inventory issue, but it is affordability that is the real driver here.
“There’s little doubt last month’s retreat in contract signings occurred because of woefully low supply levels and the sudden increase in mortgage rates,”Lawrence Yun, NAR’s chief economist, said in a statement.
“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 now having to delay their search entirely to save up for a larger down payment.”
So, will higher rates break housing market momentum?
The following chart suggest 'yes' - that surge in rates will have a direct impact on home sales (or prices will be forced to adjust lower) as affordability collapses...
And Homebuilder stocks are starting to look a lot less invincible...
As Bloomberg notes, economists consider pending sales a leading indicator because they track contract signings; purchases of existing homes are tabulated when a deal closes, typically a month or two later.