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Can the Housing Market Maintain Its Momentum?

Pending home sales inched up 0.5 percent during the year according to the Pending Home Sales Index released by the National Association of Realtors (NAR) on Wednesday.

The index moved higher by 0.5 percent to 110.1 in December from an upwardly revised 109.6 in November and also reached the highest level since March 2017, where the index had touched 111.3 points.

These modest increases point towards rise in contract activity as well as interest of aspiring buyers who are being encouraged to look for new homes at the prospect of rising mortgage rates.

“Sadly, these positive indicators may not lead to a stronger sales pace. Buyers throughout the country continue to be hamstrung by record low supply levels that are pushing up prices especially at the lower end of the market,” said Lawrence Yun, Chief Economist at NAR.

According to NAR, the uninterrupted supply and demand imbalances across the U.S. fueled price appreciation that rose to 5.8 percent in 2017. This price appreciation reflected a sixth straight year of gains at or above the 5 percent appreciation level.

“While tight inventories are still expected to put upward pressure on prices in most areas this year, we expect overall price growth to shrink, with some states experiencing decline because of the negative effects of the changes to the mortgage interest rate deduction and state and local deductions under the new tax law,” Yun said.

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