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Updated: U.S. Pending Home Sales Fall 3.7% In December

By Kitco News
Thursday January 29, 2014 10:00 AM

Editor's Note: The article was updated to include comments from the NAR chief economist. The article was updated a second time with comments from TD Securities.

(Kitco News) - The number of consumers who started the process of buying a home decreased in December, reversing the modest gains in November, according to the latest data from the National Association of Realtors (NAR).

Thursday, the NAR said its pending home sales index fell 3.7% to 100.7 in December, following November’s revised reading of 104.6. However, the association said the index is 6.1% above the December 2013 reading.

Economists were optimistic heading into the report; according to consensus forecasts, economists expected the index to rise about 0.6%. Economists pay attention to pending home sales because it is seen as a barometer for the housing market. There is typically a one-to-two month lag between signing a contract and a completed sale.

Lawrence Yun, NAR chief economist, said that the reason behind the decline in the number of pending sales is because of a slight acceleration in prices as a result of fewer homes available on the market.

"Total inventory fell in December for the first time in 16 months, resulting in fewer choices for buyers and a modest uptick in price growth in markets throughout the country," he said. "With interest rates at lows not seen since early 2013, the strength in existing-sales in upcoming months will largely depend on the willingness of current homeowners to realize their equity gains from the past couple years and trade up,” said Lawrence Yun, NAR chief economist.

Gennadiy Goldberg, U.S. strategist at TD Securities, shook off the weaker than expected numbers?, saying that seasonal factors could have lead to the decline.

“Housing markets tend to undergo considerable slowing during the winter months and there is certainly the possibility that seasonal factors exacerbated the extent of the decline,” he said. “Nevertheless, the slowdown in pending home sales momentum is quite disappointing…”

Goldberg adds he remains optimistic that the momentum in the U.S. economy will help strengthen the housing market.

“With annual payroll gains coming off their strongest year in 15 years, consumer confidence at cycle highs, and wage growth expected to accelerate in the coming months, we retain an optimistic outlook on housing, even as we caution that momentum is likely to remain choppy over the near-term,” he said.

The housing sector has shown some strength in December; last week the NAR said existing home sales rose 2.4% last month, reporting a seasonally adjusted, and annualized, rate of 5.04 million units, up from a 4.92 million sales rate in November.

Tuesday, the Commerce Department said new home sales climbed 11.6% in December to a seasonally adjusted annual rate of 481,000.

By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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