U.S. pending home sales overall fell 0.7 percent in November, and the latest government shutdown will harm the housing market, the National Association of Realtors (NAR) said Friday.

The pending home sales index, a forward-looking indicator based on contract signings, decreased from 102.1 in October to 101.4 in November. However, year-over-year contract signings slipped 7.7 percent, making this the 11th straight month of annual decreases.

“The latest decline in contract signings implies more short-term pullback in the housing sector and does not yet capture the impact of recent favorable conditions of mortgage rates,” said Lawrence Yun, NAR’s chief economist.

As for regional breakdown, the pending home sales index in the Northeast rose 2.7 percent to 95.1 in November. The index in the West also increased 2.8 percent in November to 87.2. But both regions fell year on year.

The other two major regions, U.S. Midwest and South, saw decreases in pending home sales in November, when compared to October.

Affordability continued to impact pending sales negatively, with home prices in the West rising too much, too fast, Yun suggested.

“Land cost is expensive, and zoning regulations are too stringent. Therefore, local officials should consider ways to boost local supply; if not, they risk seeing population migrating to neighboring states and away from the West Coast,” the NAR’s chief economist warned in a statement.

Although pending contracts have reached their lowest mark since 2014, there is no reason to be overly concerned, said Yun, who also predicted solid growth potential for the long term.

However, Yun indicated the latest federal government shutdown will harm the housing market, because unlike past government shutdowns, with this present closure, flood insurance is not available.

It means that roughly 40,000 homes per month may go unsold because purchasing a home requires flood insurance in those affected areas, Yun pointed out.

“The longer the shutdown means fewer homes sold and slower economic growth,” he said.

The pending home sales index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. Enditem

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