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Pending home sales jumped significantly in January for the second-straight month, confirming reports of greater homebuyer activity at the beginning of the year on the heels of decreasing mortgage rates.
The Pending Home Sales Index jumped 8.1 percent to a reading of 82.5 in January, but was 24.1 percent lower than January 2022 levels, according to data released Monday by the National Association of Realtors.
Pending home sales represent the number of homes that have gone under contract but have not yet closed, offering a picture of where the housing market is headed in the near future.
The increase in pending home sales came as the 30-year mortgage rate dropped to 6.13 percent at the end of January, the lowest rate since September 2022, according to Realtor.com data.
“Buyers responded to better affordability from falling mortgage rates in December and January,” NAR Chief Economist Lawrence Yun said in a statement.
Mortgage rates have resumed their climb, however, reaching 6.5 percent in February, the highest level of the year so far, suggesting the momentum at the start of the year may not last long.
“At the current rate, the monthly payment on a median-priced home would be 45.1 percent ($630) higher than at the same time last year,” Realtor.com Economic Data Analyst Hannah Jones said in a statement. “This is a $100 improvement over January, but many buyers are still holding off, waiting to see if prices or rates give a bit before getting into the market.”
Yun predicted that pending home sales would drop 11.1 percent overall in 2023 — to a total of 4.47 million units — then jump 17.7 percent in 2024 to 5.26 million units.
“Home sales activity looks to be bottoming out in the first quarter of this year, before incremental improvements will occur,” Yun said. “But an annual gain in home sales will not occur until 2024. Meanwhile, home prices will be steady in most parts of the country with a minor change in the national median home price.”
Pending sales increased on a monthly basis in all regions, rising 6 percent in the Northeast, 7.9 percent in the Midwest, 8.3 percent in the South, and 10.1 percent in the West, according to 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 Yun.
