Housing Contract Activity Declines in December Amid Rising Mortgage Rates
The Pending Home Sales Index, a measure of contract signings on existing homes, fell 5.5% from November to 74.2 in December, according to the National Association of Realtors (NAR). This decline snapped a four-month streak of gains, indicating that rising mortgage rates are tempering buyer enthusiasm.
Contract signings declined in all regions, with the most expensive markets experiencing the most significant impact. The West saw a 10.3% drop in activity, followed by the Northeast with an 8.1% decline.
"While the decline in contract signings is disappointing, it is not altogether unexpected," said Lawrence Yun, NAR's chief economist. "Mortgage rates have risen substantially, but demand for housing remains strong, particularly among cash buyers."
The rise in mortgage rates, despite multiple interest rate cuts by the Federal Reserve, has contributed to the slowdown in home sales. Combined with record-high median home prices, it made 2022 one of the slowest years for existing home sales in nearly three decades.
Homeowners who secured low mortgage rates in recent years are also reluctant to move and give up their favorable financing terms, further limiting inventory on the market.