Pending Sales Push Past 8% in December

If you live in the West, Midwest, or the South, you probably saw pending home sales noticeably climb month-over-month, but if you live in the Northeast, pending home sales declined by just a bit. 

The Midwest, South and West also registered year-over-year increases while the Northeast had a decline in transactions compared to last year. 

All-in-all, the Pending Home Sales Index—published by the National Association of Realtors (NAR)—which is a forward-looking indicator of home sales based on contract signings, increased in December to an index level of 77.3, a 1.3% increase. The index was benchmarked to 100 based on the level of contract signings in the year 2001. 

"The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices," said Lawrence Yun, NAR chief economist. "Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand." 

NAR also released its Economic Outlook as of January 2024, projecting a 13% increase in existing-home sales in 2024 (from 2023) to 4.62 million and a 15.8% increase in 2025 (from 2024) to 5.35 million. The annual median home price is expected to rise 1.4% to $395,100 in 2024, and then increase 2.6% to $405,200 in 2025. 

"Home sales are projected to rise significantly in each of the next two years as the market steadily returns to normal sales activity," added Yun. 

NAR forecasts that due to sizable growth in apartment construction over the past three years, rent growth will calm, which will help bring consumer price inflation to less than 3% in 2024. 

The Northeast PHSI dropped 3.0% from last month to 62.3, a decline of 3.9% from December 2022. The Midwest index increased 5.6% to 80.5 in December, up 4.3% from one year ago. 

The South PHSI jumped 11.9% to 93.0 in December, rising 1.5% from the prior year. The West index surged 14.0% in December to 61.0, up 1.5% from December 2022.  

“The housing market is showing signs of recovery, a trend that is likely to persist if mortgage rates remain on their downward trajectory,” said First American Deputy Chief Economist Odeta Kushi. Pending home sales in December increased 8.3% compared with the previous month, far surpassing the projected consensus of a more modest 2% increase.” 

“This was the largest month-over-month jump in pending home sales since 2020. Pending sales are a forward-looking indicator of home sales based on contract signings, so the December increase signals positive developments in the housing market.”  

“Consensus projections always seemed on the low side given what we've seen with mortgage applications, another leading indicator of sales activity. Average mortgage applications in December increased nearly 8% compared with the previous month, and so far in the month of January have increased approximately 10 percent compared with December.” 

“A simple analysis based on the historical relationship between mortgage applications and existing-home sales indicates that existing-home sales should accelerate,” Kushi concluded. “While the level of sales activity remains low, the positive growth is a welcome and promising sign for the housing market.”