Pending home sales trend up for first time since last spring
In a positive sign for the real estate industry — and the spring home buying season — pending home sales rose in December for the first time since May 2022, increasing 2.5% from November
Pending home sales rose in December for the first time since May 2022, increasing 2.5 percent from the previous month, the National Association of Realtors (NAR) reported on Friday.
By region, the Northeast and Midwest saw month-over-month decreases as the South and West saw month-over-month gains. All regions saw an annual decline in transactions, with the West seeing the sharpest decline at 37.5 percent.
“This recent low point in home sales activity is likely over,” NAR Chief Economist Lawrence Yun said in a statement. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”
The Pending Home Sales Index (PHSI) increased 2.5 percent to 76.9 from November to December. On an annual basis, pending sales declined by 33.8 percent. An index of 100 represents the level of contract activity in 2001.
In the Northeast, the PHSI declined 6.5 percent month-over-month and 32.5 percent year over year to 64.7. In the Midwest, the PHSI only dropped 0.3 percent from the previous month and 30.1 percent from the previous year to 77.6.
The West saw the largest gains, with pending sales increasing 6.4 percent from November, while declining 37.5 percent year over year, to a PHSI of 58.6. In the South, the PHSI increased 6.1 percent month-over-month and decreased 34.5 percent on an annual basis. to 94.1.
Yun added that consumers and their agents should prepare for a new normal when it comes to mortgage rates.
“The new normal for mortgage rates will likely be in the 5.5 percent to 6.5 percent range,” he said in NAR’s report. “Job gains will steadily become important in driving local home-sales markets. The South, in particular, is set to outperform the rest of the country, thanks primarily to better job market conditions in this part of the country compared to other regions.”
A report released by Redfin on Thursday showed that pending home sales dropped 26 percent on an annual basis during the four weeks ending Jan. 22, which represented the smallest decline in over three months of the company’s collected data. With nearly a full percent decline in mortgage rates over the past couple of months, Redfin agents saw buyers come back to the market with greater confidence, as well as entice new buyers to enter the market for the first time.
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