December Pending Home Sales Fall for 4th Straight Month

Pending home sales fell in December for the fourth consecutive month, the National Association of Realtors reported Friday—but numbers can be deceiving.

The Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, fell by 0.3% to 125.5 in December. Year-over-year, however, contract signings jumped by21.4%. And NAR Chief Economist Lawrence Yun attributed the late-year monthly declines in pending sales to a lack of inventory, not demand.

“Pending home sales contracts have dipped during recent months, but I would attribute that to having too few homes for sale,” Yun said. “There is a high demand for housing and a great number of would-be buyers, and therefore sales should rise with more new listings. This elevated demand without a significant boost in supply has caused home prices to increase and we can expect further upward pressure on prices for the foreseeable future.”

Regionally, results were mixed month over month, but all four regions reported double-digit percentage yearly gains in pending sales.

In the Northeast, sales rose by 3.1% to 112.0 in December and increased by 22.1% from a year ago. In the Midwest, the index fell by 3.6% to 111.7 but improved by 13.9% from a year ago.

Pending sales in the South increased by 0.1% to 150.6 in December and improved by 26.6% from a year ago. In the West, the index was unchanged in December at 111.3but improved by 18.9% from a year ago.

Yun said 2021 should bring about strong economic growth, supported by low mortgage rates and fiscal stimulus, which in turn will bolster existing home sales. NAR projects with rates to remain low, existing homes sales could reach 6.49 million, a 15% increase from 5.64 million in 2020. “There will also be slower home price appreciation, likely 6.6%, as increased confidence from homebuilders will ultimately lead to an increase in housing starts,” he said.