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Pending home sales fell in January, spurred by a drop-off in contract signings in the Midwest and South, according to data released Thursday.
Pending home sales dropped off 4.9 percent between December and January and were down 8.8 percent year over year to a measure of 74.3 percent on the Pending Home Sales Index, according to the National Association of Realtors. The dropoff came as homebuyers reacted to mortgage rate fluctuations.
“The job market is solid, and the country’s total wealth reached a record high due to stock market and home price gains,” NAR Chief Economist Lawrence Yun said in a statement. “This combination of economic conditions is favorable for home buying. However, consumers are showing extra sensitivity to changes in mortgage rates in the current cycle, and that’s impacting home sales.”
Contract signings in the Northeast inched up 0.8 percent during January, but were down 5.5 percent from a year ago, while the West index rose 0.5 percent but was 7 percent lower than a year ago. Pending sales in the Midwest fell 7.6 percent month over month and were down 11.6 percent annually, while the South saw pending sales decline 7.3 percent to a reading of 88.5, 9 percent lower than the year prior.
“Southern states and those in the Rocky Mountain time zone experienced faster job growth compared to the rest of the country,” Yun said. “As a result, long-term housing demand is increasing more significantly in these regions. However, the timing and number of purchases will largely depend on the prevailing mortgage rates and inventory availability.”
December’s pending home sales report — wherein contract signings shot up 8.3 percent from the previous month and were up 1.3 percent year over year — was read as a harbinger for a strong housing market to start off 2024. However, that was before mortgage rates increased again and brought about January’s muted results.
“Pending home sales in December seemed to promise good things for 2024’s housing market — at least so long as mortgage rates stabilized or fell,” Kate Wood, a home and mortgage expert at the personal finance website NerdWallet, said in a statement. “That promise was quickly broken as mortgage rates started to creep back upward in January. Home buyers retreated and pending home sales decreased nearly 5 percent, erasing December’s gains.”
