Pending home sales fell 4.9% in January compared with December and were down 8.8% compared with January 2023, according to the National Association of Realtors (NAR).
Regionally, and month over month, the Northeast and West posted gains in transactions while the Midwest and South recorded losses.
Year over year, all four U.S. regions registered decreases.
The index fell to a score of 74.3 in January. It was benchmarked to 100 in 2001.
“The job market is solid, and the country’s total wealth reached a record high due to stock market and home price gains,” says Lawrence Yun, chief economist for NAR, in a statement. “This combination of economic conditions is favorable for home buying. However, consumers are showing extra sensitivity to changes in mortgage rates in the current cycle, and that’s impacting home sales.”
Pending home sales increased 0.8% in the Northeast, compared with December, while pending sales increased 0.5% in the West.
Pending sales decreased 7.6% in the Midwest and 7.3% in the South.
“Southern states and those in the Rocky Mountain time zone experienced faster job growth compared to the rest of the country,” Yun says. “As a result, long-term housing demand is increasing more significantly in these regions. However, the timing and number of purchases will largely depend on the prevailing mortgage rates and inventory availability.”
In a separate statement, Selma Hepp, chief economist for CoreLogic, says “pending home sales are returning to a softer improvement after a spike in December, which followed a sudden drop in mortgage rates.”
“We expect future pending home sales to improve over last year’s levels, though at a muted pace, given the pull-back in new listing growth,” Hepp says. “It’s quite possible that the Fed may not change its strategy on interest rates until late this year, so potential home buyers may need to contend with high mortgage rates for the remainder of the year.”
Photo: Joshua Sortino