Pending Home Sales Slip 4.9% in January

(Illustration courtesy of NAR)

Pending home sales slipped 4.9% in January, according to the National Association of Realtors.

The Pending Home Sales Index–a forward-looking indicator of home sales based on contract signings–decreased to 74.3 in January. Year over year, pending transactions were down 8.8%. An index of 100 is equal to the level of contract activity in 2001.

“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. “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.”

First American Chief Economist Mark Fleming said it’s no surprise that sales contracts signed in January, as rates were rising, retreated a bit. “Rising rates hit affordability and discourage sellers from selling,” he said.

Fleming said he expects existing home sales to retreat in February if this relationship between existing and pending (advanced one month) holds true.

“Southern states and those in the Rocky Mountain time zone experienced faster job growth compared to the rest of the country,” Yun added. “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.”