The latest figures on pending home sales have revealed a record low in the United States, plunging to a level even worse than it was during the financial crisis in 2008.
The National Association of Realtors reported that the pending home sales index fell by 8.7% from November to December, and is now at its lowest level since the organization started tracking the monthly numbers in 2001. This is a much larger drop than what was expected, with even some of the most pessimistic forecasters predicting a decline of only 4%.
The real estate market has been suffering from a combination of several factors, including tight inventory, rising mortgage rates, and higher home prices. Last year’s tax overhaul has also impacted the market, as homeowners now must prove significant capital gains in order to avoid paying higher taxes.
The news is particularly discouraging given that it was just last year that the housing market saw an uptick in activity. The only consolation is that although pending home sales are down, actual home sales have still managed to remain relatively strong. This may be due to the fact that buyers have become more price-sensitive, but that may not be enough to buoy the market against the current economic headwinds.
It remains to be seen if the drop in pending home sales is a mere blip or a sign of something more serious. What is clear is that the housing market has been hit hard and that the decline in pending home sales may be a sign that the market is heading in a downward direction. If so, it will be up to the government and the private sector to help prop up the housing market and turn things around. Otherwise, the long term implications could be dire for struggling homeowners and potential buyers alike.