Housing Contract Activity Slows Amid High Mortgage Rates
The Pending Home Sales Index, tracking contract signings for existing homes, reported a 5.5% decline in December, marking an end to four consecutive months of growth.
All regions experienced a drop in contract signings, with the most expensive areas seeing the largest impact from rising mortgage rates. The West led with a 10.3% decrease, followed by the Northeast with an 8.1% decline. Year-over-year, contract activity fell 5% across all regions.
"While one step back after four months of gains isn't ideal, it's not surprising," said Lawrence Yun, chief economist at the National Association of Realtors (NAR). "High mortgage rates haven't significantly impacted demand due to increased cash transactions."
Mortgage rates have risen throughout the fall and ended the year near 7%, despite multiple rate cuts by the Federal Reserve. This, coupled with record-high median home prices, has contributed to the slowdown in home sales. Only 4.06 million homes were sold in 2022, the lowest number in nearly three decades.
Additionally, homeowners with locked-in low mortgage rates are less inclined to move, limiting the number of homes available for sale.