Pending home sales took a step back in December, with all regions posting a month-over-month decline in contract activity, according to the National Association of Realtors.
The monthly Pending Home Sales Index fell in December as month-over-month contract signings dropped 4.9% to 103.2. However, annual contract signings were up 4.6%.
However, NAR Chief Economist Lawrence Yun said that low inventory remains a long-term issue despite projections that mortgage rates will hold under 4%, and net job creation will likely surpass 2 million in 2020.
"Due to the shortage of affordable homes, home sales growth will only rise by around 3%," Yun said. "Still, national median home price growth is in no danger of falling due to inventory shortages and will rise by 4%. The new home construction market also looks brighter, with housing starts and new home sales set to rise 6% and 10%, respectively."
Affordable markets where listing prices are around $250,000 are attracting some of the most significant buyer attention, according to Yun. These housing markets include Fort Wayne, Ind., Burlington, N.C., Topeka, Kan., Pueblo, Colo., and Columbus, Ohio.
"The state of housing in 2020 will depend on whether homebuilders bring more affordable homes to the market," Yun said. "Home prices and even rents are increasing too rapidly, and more inventory would help correct the problem and slow price gains."
Of the four regions, the South experienced the sharpest fall in December, down 5.5% to an index of 118.1. Pending home sales in the West also dwindled 5.4% month over month, followed by a 4% decline in the Northeast and a 3.6% drop in the Midwest.