According to the National Association of Realtors, signed contracts on existing properties plummeted 5% from the previous year and a steep 5.5% from the previous month in December.
The index was at its lowest point since August, and the decline came after four months of advances.
These so-called pending sales are the most recent sign of market activity and a predictor of future closings. The sharp increase in mortgage interest rates that December shoppers had to deal with might have reduced demand.
The 30-year fixed mortgage’s average rate increased from 6.68% on December 6 to 7.14% on December 19. The 7% threshold seems to be an emotional barrier for buyers, notwithstanding realtors’ claims that buyers were adjusting to the new normal of higher interest rates.
The U.S. Census reports that sales of newly constructed homes, which are also based on signed contracts, increased in December. However, in an effort to attract buyers, homebuilders have been aggressively lowering mortgage rates.
All regions saw a decline in pending sales, but the largest monthly declines were in the West and Northeast, where they fell by 8.1% and 10.3%, respectively. The cost of homes is higher in such areas.
According to Lawrence Yun, chief economist for the National Association of Realtors, contract activity declined more precipitously in the expensive Northeast and West, where high mortgage rates have significantly reduced affordability. Gains in employment typically have a bigger effect in areas with lower costs. Whether heavier-than-normal winter precipitation affected the timing of purchasing is unknown.
Across the country, prices continue to rise and remain persistently high. The most recent reading from the S&P Case-Shiller national house price index indicates that annual gains quickened in late fall and early winter.
Demand for home purchases doesn’t seem to be increasing at all in January.The Mortgage Bankers Association reports that last week’s mortgage applications for house purchases were 7% fewer than those from the same week previous year.
According to a recent Redfin analysis, home sales are also at their weakest pace in five years. The average house listing that went under contract, as of the four weeks ending January 26, remained on the market for 54 days before the seller accepted an offer. This is the longest period since March 2020 and one week longer than it was at this time last year.
The deficit occurs at a time when the number of available homes is finally increasing dramatically. According to Realtor.com, the number of newly listed homes increased by slightly more than 37% in January as compared to December.
According to Danielle Hale, chief economist at Realtor.com, the change in seller activity may signal a turning point in the buyer-seller impasse brought on by high mortgage rates. The increase is probably the result of some lingering advantages from the decline in mortgage rates, which may eventually wear off.
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