Home Sales Continue to Drop. Will Prices Follow Suit?

The red hot housing market appears to be something of the past, according to recent home sale figures.

The National Association of Realtor’s (NAR) Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 2.6 percent in October from September’s figure. On a year-over-year basis, contract signings dropped by 6.7 percent, making October the tenth straight month of annual decreases.

All four major regions saw a decline when compared to a year ago, with the West seeing the most pronounced drop. 

The NAR said it now expects sales of existing homes to decline 3.1% in 2018, and another 0.4% in 2019. The group also forecasts home prices will fall 2.5% next year.

Meanwhile, RE/MAX issued its own National Housing Report for November 2018, also pointing to the development of a new cycle: Weaker demand and rising supply (i.e. greater downward pressure on prices).

Across the 53 metro areas surveyed, inventory rose 3.0% – the highest monthly year-over-yeargain in the 10-year history of the report, following October’s 1.0% increase that ended a streak of 119 months of year-over-year declines dating back to November 2008. The Months Supply of Inventory rose to 3.9, the highest for any month since 4.2 in December 2016.November home sales, meanwhile, declined 6.9%, which was the second-largest year-over-year decline of 2018 and the biggest year-over-year sales decline for November in five years. Thus far in 2018, only April and July sales exceeded 2017 totals for the corresponding months.