Pending Home Sales Rise in November: What's Behind the Uptick?

The homebuilding industry in the United States seems to be gaining traction as homebuyers are gaining confidence supported by an improving job environment, optimism surrounding the Fed rate cuts and increased supply of new inventory. Recently, the National Association of Realtors (NAR) released a report summarizing the trends of the November 2024 pending home sales, that is, the signed home sale contract with transactions yet to be closed. The month’s pending home sales in the United States increased month over month and year over year.As homebuyers adjust to the new average mortgage rate standard, revolving around 6%, the housing market is anticipated to witness a considerable boost as we move into 2025.Diving Into the NumbersPer the Dec. 30, 2024 report of NAR, November’s pending home sales index (PHSI) – a forward-looking indicator of home sales based on contract signings – was 79.0, up 2.2% from October 2024 and 6.9% from November 2023. The month-over-month gain was mainly driven by positive transaction trends across the country’s Midwest, South and West regions. Moreover, the year-over-year gain was attributable to increased signings in all four U.S. regions, especially the West.In November 2024 PHSI grew 0.4% in the Midwest, 5.2% in the South and 0.5% in the West, compared with October 2024. Contrarily, the index fell 1.3% month over month in the Northeast region.On a year-over-year basis, PHSI grew 11.8% to 64.3 in the West, 8.5% to 94.5 in the South, 5.6% to 67.8 in the Northeast and 1.6% to 78.1 in the Midwest.Knowing the Mortgage RateAccording to the mortgage finance agency Freddie Mac, the 30-year fixed-rate mortgage was 6.85% for the week concluded on Dec. 26, 2024. This fixed rate moved up 13 basis points (bps) from 6.72% at the week concluded on Dec. 19, 2024, and four bps from 6.81% at the week concluded on Nov. 27. Notably, the recent 30-year fixed-rate mortgage was up 24 bps from 6.61% at the week concluded on Dec. 28, 2023.Per the NAR Chief Economist Lawrence Yun, “Mortgage rates have averaged above 6% for the past 24 months. Buyers are no longer waiting for or expecting mortgage rates to fall substantially. Furthermore, buyers are in a better position to negotiate as the market shifts away from a seller’s market.”Our Take on the ScenarioThe three consecutive Fed rate cut slashes in 2024, with the expectations of two more cuts in 2025, along with the improving job market in the United States and the gradual acceptance of the new mortgage rate benchmark seems to be pulling back the U.S. housing market from falling off the cliff.The homebuilding industry’s share price performance has underperformed the broader sector and the Zacks S&P 500 composite in the past year. Although a sticky inflation scenario has been hurting the industry to some extent, the tailwinds mentioned above are sufficient enough for the industry to thrive moving into 2025.Image Source: Zacks Investment ResearchNotably, the November 2024 numbers of the existing and new home sales also reflect the improving trend across the housing market. Per NAR, the existing home sales in the month had witnessed growth of 4.8% from October and 6.1% from the prior year, settling at a seasonally adjusted annual rate of 4.15 million. According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, the new residential sales in November were up 5.9% month over month and 8.7% year over year at 664,000 units.This advantageous market scenario is benefiting a few of the renowned homebuilders of the country including Taylor Morrison Home Corporation TMHC, NVR, Inc. NVR, KB Home KBH and M/I Homes, Inc. MHO. The positive trend is substantiated by the year-over-year growth trend in the earnings per share (EPS) estimates for 2025.Four Bundled Homebuilders to Look IntoTaylor Morrison: This Arizona-based homebuilder and land developer currently carries a Zacks Rank #3 (Hold). The company’s shares have gained 16.1% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.TMHC’s EPS estimates for 2025 are expected to grow 11.2% year over year. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 11.5%.NVR: Headquartered in Reston, VA, this homebuilder currently carries a Zacks Rank of 3. The stock has gained 17.4% in the past year.NVR’s EPS estimates for 2025 are expected to grow 7.4% year over year. The company’s earnings surpassed the consensus mark in two of the trailing four quarters and missed on the remaining two occasions, the average surprise being 2.6%.KB Home: This homebuilder, based in Los Angeles, CA, currently carries a Zacks Rank of 3. Shares of the company have gained 5.9% in the past year.KBH’s EPS estimates for fiscal 2025 are expected to grow 7.2% year over year. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and met on the remaining occasion, the average surprise being 10.8%.M/I Homes: Based in Columbus, OH, this homebuilder currently carries a Zacks Rank of 3. Shares of the company have inched down 0.8% in the past year.MHO’s EPS estimates for 2025 are expected to grow 3% year over year. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed on the remaining one occasion, the average surprise being 2.3%.Just Released: Zacks Top 10 Stocks for 2024Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential. See New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report KB Home (KBH): Free Stock Analysis Report NVR, Inc. (NVR): Free Stock Analysis Report Taylor Morrison Home Corporation (TMHC): Free Stock Analysis Report M/I Homes, Inc. (MHO): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks