Pending home sales increased in January making the second consecutive month pending home sales rose. The December increase marked the first upward movement in pending sales since May 2022, according to the National Association of Realtors® (NAR).
All four U.S. regions posted monthly gains for January. The Western region led the nation with 10.1% growth, followed by the Southern, Midwestern and Northeastern regions marking gains of 8.3%, 7.9% and 6.0% respectively. However, each region experienced year-over-year drops in transactions, reports NAR.
“An extra bump occurred in the West region because of lower home prices, while gains in the South were due to stronger job growth in that region,” said NAR Chief Economist Lawrence Yun.
The Pending Home Sales Index (PHSI) — a forward-looking indicator of home sales based on contract signings — improved by 8.1% to 82.5% in January. Though year-over-year pending transactions dropped 24.1%.
Yun attributes the improvement in contract signings to falling mortgage rates in December and January, resulting in homes being more affordable. NAR expects job growth throughout 2023 and 2024 and a steady drop in the 30-year fixed mortgage rate with an average rate of 6.1% and 5.4% in 2023 and 2024, respectively.
Even so, Yun expects annual existing-home sales nationwide to drop 11.1% in 2023 to a total of 4.47 million units, but activity will bottom out in the first quarter of 2023. The remainder of the year will see incremental improvements. He then anticipates the trend will turn upward significantly – improving by 17.7% in 2024 or contract signings for 5.26 million units.
NAR also predicts median existing-home prices will stabilize in most markets when compared to the previous year. The national median home price is projected to decrease this year by 1.6% to $380,100, then increase by 3.1% in 2024 to $391,800.
The PHSI is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed. The sale usually is finalized within one or two months of signing. The index is based on a sample that covers about 40% of multiple listing service data each month.
Read the full report at nar.realtor/newsroom/pending-home-sales-improved-for-second-straight-month-up-8-1-in-january.
By Tom Kalinski. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into the Business Hall of Fame in 2016 and has a 40-year background in commercial and residential real estate. For questions, email Tom at [email protected], call 303.441.5620, or visit boulderco.com.