The seller’s market that has been bolstered by low-interest rates and low inventory might be coming to an end as home sales have shown a decrease in recent months.
The National Association of Realtors reports that pending home sales dropped 2.2 percent in November 2021 compared to October 2021. The decrease in home sales defies projections provided by economists to MarketWatch, which predicted a 0.8 percent increase for pending home sales for November. In addition, pending sales dropped 2.7 percent as compared to November 2020.
“There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices,” NAR chief economist Lawrence Yun said in a statement.
The sharpest pending home sales fell in the Midwest, dropping 6.3 percent. The West followed with sales sliding 2.2 percent from October. In the Northeast and South, pending home sales were flat. In all four regions of the United States, contract signing declined.
“Buyer competition alone is unrelenting, but home seekers have also had to contend with the negative impacts of supply chain disruptions and labor shortages this year,” Yun said. “These aspects, along with the exorbitant prices and a lack of available homes, have created a much tougher buying season.”
The rising cost of homes coupled with low inventory is contributing to the decline of pending home sales. In December, the NAR revealed that the median price for all housing types rose 13.9 percent in November as compared with the previous year. Yet the housing inventory total was 1.11 million units, a 9.8 percent drop from October 2021 and 13.3 percent from the previous year.
Economists do, however, predict the low home inventory will improve by 2023. This expectation is based on the idea that more sellers will be entering the market. Still, COVID-19 variants and supply chain shortages also could continue to cause sales and home construction delays.
Real estate experts are remaining optimistic about pending home sales and a strong seller’s market.
“Real estate demand continues to outmatch supply, and our survey data suggests that first-time shoppers both expect competition and are adjusting their plans to prepare for it further in advance,” Danielle Hale, chief economist at Realtor.com said in a statement. “The early part of the year is recently among the most competitive seasons, with buyers aiming to get a jump-start on new year’s resolutions, while sellers tend to wait until the heart of spring to list homes for sale.”
Despite the home buying boom, home buying didn’t increase for Black Americans. The Black homeownership rate hit its lowest level since the 1960s, and experts didn’t expect that to change anytime soon.