Pending Home Sales Fall to Two-Year Low

The National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI) fell in December to its lowest level in more than two years, with declines reported in all four of the country’s major regions.

The index, a forward-looking sales indicator based on contract signings, dropped 8.7 percent to 92.4 from a downwardly revised reading of 101.2 in November. Compared to December 2012, pending sales were down 8.8 percent.

December’s index was at its lowest measure since October 2011, when it read 92.2.

NAR chief economist Lawrence Yun said there were several factors at play in last month’s falloff in contracts—not the least of which was onset of harsh winter storms.

“Unusually disruptive weather across large stretches of the country in December forced people indoors and prevented some buyers from looking at homes or making offers,” Yun said. “Home prices rising faster than income is also giving pause to some potential buyers, while at the same time a lack of inventory means insufficient choice.”

Job growth (however small it was) and pent-up demand continue to serve as positive factors, though Yun says “it could take several months for us to get a clearer read on market momentum.”

NAR forecasts existing-home sales this year will hold close to 5.1 million, essentially the same as in 2013.

The PHSI in the Northeast fell 10.3 percent in December to 74.1, putting it 5.5 percent below year-ago levels. In the Midwest, the index declined 6.8 percent to 93.6, falling 6.9 percent short of last year.

While they may not have been hit as hard by the ice, the South and West also reported declines in pending sales. In the South, numbers fell 8.8 percent to an index of 104.9, 6.9 percent below a year ago. In the West—where constrained inventory is a heavier burden—pending sales were down 9.8 percent to 85.7, a 16.0 percent annual drop.