December pending home sales show positive gains for the first time since the spring
Finally, some good news.
Pending home sales in December were up 2.5% from November, according to the Pending Home Sale Index put out by the National Association of Realtors®. This was the first positive report in pending home sales since May 2022 and comes after six months of declines.
This positive momentum is likely partly attributed to a drop in mortgage rates from the highs seen in October.
“This recent low point in home sales activity is likely over,” said Lawrence Yun, chief economist at NAR. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”
Regional breakdown
Contract activity is still registering down year-over-year by 33.8%to 76.9 on the Pending Home Sales Index, a forward-looking indicator based on contract signings maintained by the NAR. An index of 100 is equal to the level of activity in 2001. However, contract signings were up in two of the four regions.
- Northeast: down 6.5% to 64.7, down 32.5% from December 2021
- Midwest: down 0.3% to 77.6, down 30.1% from December 2021
- South: up 6.1% to 94.1, down 34.5% from December 2021
- West: up 6.4% to 58.6, down 37.5% from December 2021
Getting used to the new normal
This report shows that buyers are beginning to come back to the negotiating table after months of declining activity. One theory to explain this is that they were waiting for mortgage rates to hit their peak and start dropping, which we’ve seen over the last few months.
“The new normal for mortgage rates will likely be in the 5.5% to 6.5% range,” Yun expects. “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.”
Source: https://www.nar.realtor/newsroom/pending-home-sales-increased-2-5-in-december-ending-six-month-slide