US pending home sales unexpectedly drop in November

Home prices were just about the only thing which was on the rise in the US home building sector in November, according to the findings of a monthly survey from a business lobby group.

The National Association of Realtors’ pending home sales index slipped by 0.9% month-on-month to 106.9 – its third fall in four months - as buyers continued to “battle” higher house prices and a shrinking supply of homes for sale.

Economists had pencilled in growth of 0.5% for the index.

November’s year-on-year gain of 2.7% in the PHI also marked the smallest annual rise since October 2014, when it registered growth of 2.6%.

The PHI, which is calculated on the basis of contract signings, is meant to be a forward-looking indicator for levels of activity in the sector.

"Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months despite low mortgage rates and solid job gains.

“While feedback from Realtors continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers," Lawrence Yun, NAR’s chief economist, said.

First time buyers in higher priced markets were most likely to face affordability issues - thus crimping sales growth - especially given the prospect of dearer mortgage rates.

"We view the recent drop in existing home sales as temporary [...] Nonetheless, the ongoing softness in pending sales suggests some risk to the housing market outlook in early 2016. Because the housing market is often a bellwether for the health of the consumer sector, we will be attentive to any further indication of slowing," Barclays's Rob Martin said in a resaerch note sent to clients.