Pending US Home Sales Dip Amid High Costs
US pending home sales witnessed a decline in December for the first time since July due to elevated borrowing costs and property prices, particularly in high-value regions.
According to the National Association of Realtors (NAR), contract signings fell 5.5% to 74.2. This decline exceeded economists' predictions and was driven by the sharpest monthly drops since 2022 in the West and Northeast.
"Contract activity saw a more significant drop in the expensive Northeast and West regions, where higher mortgage rates have significantly impacted affordability," commented Lawrence Yun, NAR's chief economist. "It remains uncertain whether heavier-than-usual winter precipitation affected the timing of purchases."
Mortgage rates, which dropped to a two-year low of 6% in September, have since rebounded to over 7%. Home prices also continue to rise at a slower pace, with the S&P CoreLogic Case-Shiller Index showing a nationwide increase of 3.8% year-over-year in November.
Pending home sales are a leading indicator for previously owned home sales, as contracts are typically signed a month or two before the sale. The December decline signals a possible sluggish start to 2023, following the worst home resale market since 1995 in 2022.
Sales declined in the South, the largest housing region, as well as in the Midwest.