Housing Contract Activity Slows in December amid Rising Mortgage Rates
The Pending Home Sales Index, tracking contract signings on existing homes, fell 5.5% month-over-month to 74.2 in December, ending a four-month growth streak, reports the National Association of Realtors (NAR). This decline indicates a slowdown in home contract activity, likely influenced by higher mortgage rates.
Contract signings declined nationwide, particularly in the West (10.3%) and Northeast (8.1%). Year-over-year, contract activity dropped 5% across all regions.
"While a one-month decline in contract signings after four consecutive gains is not ideal, it's not entirely unexpected," said Lawrence Yun, NAR's chief economist. "Despite higher mortgage rates, housing demand remains resilient due to increased cash purchases."
Pending home sales, typically preceding completed sales by a month or two, serve as an indicator of future housing market activity. Despite multiple interest rate cuts by the Federal Reserve, mortgage rates have escalated in recent months, reaching around 7% at the end of 2022.
This increase in mortgage rates, coupled with record-high median home prices, contributed to sluggish home sales last year. According to the NAR, only 4.06 million existing homes were sold in 2022, with a median price of $407,500.
Homeowners with low mortgage rates from recent years are also hesitant to move, further limiting inventory on the market.