Pending sales of US existing homes fell in December by the most since April 2020, an unusually large drop after the housing market appeared to be gaining some momentum.
An index of contract signings decreased 9.3% to 71.8 last month, according to data released Wednesday by the National Association of Realtors. The decline was regionally broad and well below the lowest estimate in a Bloomberg survey of economists.
“The housing sector is not out of the woods yet,” NAR Chief Economist Lawrence Yun said in a statement. “After several months of encouraging signs in pending contracts and closed sales, the December new contract figures have dampened the short-term outlook.”
Housing activity typically slows in winter months and picks up more in the spring selling season. While NAR adjusts the data for these patterns, the drop was still the largest for any December in data back to 2001.
Yun said it’s unclear whether the figure was a one-off or the start of a worsening trend. Pending-homes sales tend to be a leading indicator for previously owned homes, as houses typically go under contract a month or two before they’re sold.
Activity may pick up soon as mortgage rates have kicked off the new year at some of the lowest levels since 2022, and home prices are growing at a much slower pace than last year. However, much of the outlook also depends on available inventory, which has struggled to recover to pre-pandemic levels.
The recent bout of lower mortgage rates may be short-lived as US Treasury yields, which influence home-financing costs, have climbed to the highest level in months amid a rout in Japanese bonds and geopolitical factors.
Wednesday’s report showed contract signings dropped in all four regions, including double-digit slides in three. Yun said interpreting the figures in the winter, particularly December, can be “tricky” given the holidays, vacation time and winter weather.
Meanwhile, addressing affordability concerns has been a key talking point lately for President Donald Trump ahead of this year’s midterm elections. He’s already laid out a slate of proposals aimed at the housing market including an executive order targeting institutional investors on Tuesday.
Written by: Julia Fanzeres — With assistance from Chris Middleton @Bloomberg
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