Pending home sales fell 2.5% in November as prospective buyers were put off my higher mortgage rates.
Stock-market investors have profited smartly from a postelection rally, but home buyers have fared worse after the surprise election of Donald Trump. The reason: higher mortgage rates.
An index that measures pending home sales in the U.S. fell 2.5% in November to the lowest level in nearly a year. The index dropped to 107.3 from 110 in the prior month, the National Association of Realtors said Wednesday.
Interest rates have risen on the expectation that a Trump administration will goose the economy with tax cuts and fresh spending, causing inflation to rise.
The cost of a 30-year fixed mortgage has surged from 3.59% before the Nov. 8 election to 4.36%.
The result has been a similarly sizable jump in mortgage rates at a time when there’s already a shortage of properties available for sale.
The cost of a 30-year fixed mortgage has surged from 3.59% before the election to 4.36%. Rates are now almost a full percentage point higher compared to just six months ago.
“The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election,” said Lawrence Yun, chief economist at the trade group. “Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”
Pending home sales fell the steepest in the West, with demand also declining in the South and Midwest. Only the Northeast saw an increase in pending sales.
Some relief for prospective home buyers could come in 2017, however.
Builders have stepped up construction and companies expect a business friendly Trump administration to keep the economy chugging along. Steady growth and a slew of new hiring over the last five years has given many families the means and confidence to buy a home.
Despite fewer pending sales in November, more homes are expected to be sold in 2016 than any year since 2006.