Pending home sales declined as a whole in December, but for the second straight month the Western region experienced a slight increase, according to the National Association of RealtorsÒ.

The Pending Home Sales Index decreased 2.2% to 99.0 in December, down from 101.2 in November. Additionally, year-over-year contract signings fell 9.8, making this the twelfth straight month of annual decreases.

The PHSI in the Northeast rose 2.0% to 93.2 in December, and is now 2.5% below a year ago. In the Midwest, the index fell 0.6% to 97.5 in December, 7.2% lower than December 2017. Pending home sales in the South fell 5% to an index of 109.7 in December, which is 13.5% lower than a year ago. The index in the West increased 1.7 in December to 88.4 and fell 10.8% below a year ago.

Lawrence Yun, NAR chief economist, cited several reasons for the decline in pending sales. “The stock market correction hurt consumer confidence, record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December,” he said.

Yun added that, to date, the partial government shutdown has not caused any obvious damage to home sales. “75% of Realtors® reported that they haven’t yet felt the impact of the government closure. However, if another government shutdown takes place, it will lead to fewer homes sold,” he said.

According to Yun, as the government reopens, more mortgage options will come available for consumers. “Some home transactions were delayed, but we now expect those sales to go forward,” he said. Still, there is growth in certain pockets. Yun cited year-over-year increases in active listings from data at realtor.com® to illustrate a potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., San Francisco-Oakland-Hayward, Calif., San Diego-Carlsbad, Calif., and Portland-Vancouver-Hillsboro, Ore.-Wash. saw the largest increase in active listings in December compared to a year ago.

Yun said despite the low home sales in December, he is confident that the housing market will see improvement in 2019. “The longer-term growth potential is high. The Federal Reserve announced a change in its stance on monetary policy. Rather than four rate hikes, there will likely be only one increase or even no increase at all. This has already spurred a noticeable fall in the 30-year, fixed-rate for mortgages. As a result, the forecast for home transactions has greatly improved, “ Yun said.

Joel Kan, the Mortgage Bankers Association’s associate VP of Industry Surveys and Forecasts, was similarly upbeat: “December’s drop in pending sales was likely the reflection of potential home buyers reacting to the economic uncertainty and significant stock market volatility we saw toward the end of 2018. Weakness in purchase mortgage application activity was prevalent before and around the holidays as well, but there has been a rebound in some of the past few weeks. If home prices continue to moderate, and inventory starts to rise more meaningfully, it is likely that home sales will start to pick up headed into the spring buying season.”