Pending home sales unexpectedly fell in the month of November as homebuyers were hesitant to buy due to higher prices.
The National Association of Realtors' pending home sales index, which tracks the number of homes that are under contract to be sold, slipped 2.2% to 122.4 in November on a monthly basis. The latest reading came in short of the 0.5% increase expected by economists surveyed by Refinitiv and well below October's 7.5% increase. On a year-over-year basis, contract signings slid 2.7%.
An index of 100 is equal to the level of contract activity in 2001.
All regions in the U.S. posted declines in pending home sales. The Midwest saw the biggest drop, falling 6.3% last month. Signings in the West fell 2.2%, while sales in the South and Northeast declined 0.7% and 0.1%, respectively.
NAR chief economist Lawrence Yun attributed the drop to low housing supply and buyers being hesitant about home prices.
On Tuesday, S&P CoreLogic Case-Shiller reported that its 20-city composite index surged 18.4% year over year in October, marking the fifth-largest annual gain on record for U.S. home prices, but down from the previous month's growth of 19.1% on an annual basis.
Total housing inventory at the end of November amounted to 1.11 million units, down 9.8% from October and down 13.3% from a year ago. Unsold inventory sits at a 2.1-month supply at the current sales pace, a decline from both the prior month and from a year ago.
"While I expect neither a price reduction, nor another year of record-pace price gains, the market will see more inventory in 2022 and that will help some consumers with affordability," Yun said.
Yun said housing demand continues to be high, with homes placed on the market for sale going from listed status to under contract in approximately 18 days.
"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," he explained. "These aspects, along with the exorbitant prices and a lack of available homes, have created a much tougher buying season."
Looking ahead, Yun warns that a countrywide surge of the omicron COVID-19 variant poses a risk to the housing market's performance by sidelining buyers and sellers and delaying home construction.