Homebuyers abandoned the market in droves during November: They signed 16% fewer sales contracts than the month before

This marks the first decline in the National Association of Realtors (NAR) Pending Home Sales index, released Tuesday, after nine straight months of gains. The drop also exceeded analysts’ expectations: A panel of experts from Briefing.com had forecast a 2% decrease.

“People took a breather,” said David Crowe, chief economist for the National Association of Home Builders.

NAR chief economist Lawrence Yun blamed the fall on the scheduled end of the first-time homebuyers tax credit, which refunded up to $8,000 in income taxes for qualified homebuyers. The credit initially was to lapse on Dec. 1, but Congress extended it through the end of June.

Before that extension was announced, many house hunters were scrambling to sign contracts under the deadline. Once the credit deadline was pushed back, buyers felt less urgency to sign deals, which left November depleted.

“It will be at least early spring before we see notable gains in sales activity as homebuyers respond to the recently extended and expanded tax credit,” Yun said.

First-time homebuyers had become an increasingly big slice of the market share. NAR estimated that 51% of the sales closings in November were to first-timers.

Despite the steep month-over-month decline in November, contract signings are still up 15.5% compared with a year ago, when the housing market was deep in the doldrums. Yun said that increase underlined his contention that the market has gained considerable momentum.

The extended tax credit will, however, provide a boost to a market that already seems to be recovering.

“We expect another surge in the spring as more home buyers take advantage of affordable housing conditions before the tax credit expires,” said Yun.

Crowe sees one thing that could push homebuyers off the fence sooner: “The increase in interest rates could add to the urgency,” he said.

He forecasts a gradual rise from current rates of about 5% for a 30-year fixed-rate mortgage to about 5.5% by late summer. That would add about 5% to the monthly mortgage payment, about $50 dollars on a $200,000 loan.

Regionally, the Northeast and Midwest absorbed the steepest declines in signed contracts: Both were down 25.7% compared with October. In the South, pending sales fell 15%, and in the West sales inched down 2.7%

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