Pending home sales ended the 2016 year on a hight note. According to the National Association of Realtors® (NAR), pending sales posted an increase of 1.6% to 109.0 in December from 107.3 in November.
The NAR said that sales picked up significantly in the South and West, but the numbers were offset by decreasing sales in the Northeast and Midwest.
In December, the South saw an increase of 2.4% to an index of 121.3 and are now 0.5% higher than this same time last year. The West climbed 5.0% in December to 106.1, and is now 5.0% than last December.
The NAR predicts existing-home sales in 2017 to be approximately 5.54 million, a 1.7% increases from 2016, which was the best year of sales since 2006. The national median existing-home price in 2017 is forecasted to rise 4%.
Lawrence Yun, NAR chief economist is worried about the low housing inventory and rising mortgage rates. Yun had said, “Pending sales rebounded last month as enough buyers fended off rising mortgage rates and alarmingly low inventory levels to sign a contract,” he said. “The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs. Sales will struggle to build on last year’s strong pace if inventory conditions don’t improve.”
According to Yun, “The dismal number of listings in the affordable price range is squeezing prospective first-time buyers the most,” said Yun. “As a result, young households are missing out on the wealth gains most homeowners have accrued from the 41 percent cumulative rise in existing home prices since 2011.”
Yun expects housing starts – which for another year undershot overall demand – to jump to around 1.26 million units, an increase of 7.9 percent from 2016 (1.16 million).
“Especially if construction-related regulations are relaxed, all eyes will be on the homebuilding industry this year to see if they can finally start making up lost ground on the severe housing shortages impacting much of the country,” added Yun.