WASHINGTON (12/31/13)--A key forecast of home sales indicated that there will be increased activity in the real estate market in early 2014, but that growth will stagnate before rising again in 2015.
The National Association of Realtors' Pending Home Sales Index was up 0.2% to 101.7 in November, the trade association said on Monday. The increase, from a downwardly revised 101.5 in October, is the first expansion of the measure in five months.
November's data, however, shows that the housing market isn't as active as it was during the fourth quarter of 2012. On a year-over-year basis, the index was down in November by 1.6%. Revisions to the October numbers saw the index decline that month by 2.2% on an annualized basis.
The November 2013 growth was also eclipsed by expectations. A median prediction of 30 economists surveyed by Bloomberg had predicted the pending home sales index would grow by 1% (Bloomberg.com Dec. 30). Moody's analysts had predicted the index would increase by 1.6% (Economy.com Dec. 30).
NAR Chief Economist Lawrence Yun, however, said that the monthly increase means that we may have passed a brief cyclical real estate downturn, due to recent positive labor market news. The relatively weak fourth quarter, he said, doesn't cancel out a strong year. The NAR is predicting that total sales in 2013 will be at their highest in seven years, at 5.1 million--although the number is expected to stagnate in 2014 before rising to 5.3 million in 2015.
Acting as a drag on demand, Yun said, are higher mortgage interest rates and rising home prices. The NAR is predicting that the national median existing home price will be up in 2013 by 12% to $197,000. Bloomberg analysts said that this trend is being driven by a limited supply of homes on the market.
Moody's analysts, however, expect increased real estate market activity in 2014. They said that employment and income growth should accelerate along with the number of first-time home buyers--a crucial missing component in the post-2008 housing market recovery. The main threat to the industry next year, the analysts said, is an unexpected rise in mortgage interest rates.
The NAR pending home sales index is based on data that represents roughly one-fifth of transactions for existing home sales. An index of 100 is equivalent to the level of contract activity in 2001. Moody's analysts described the measure as a prominent indicator that "leads changes in existing-home sales by around one to two months."