Report suggests so…
In December, there was a significant rise in the number of pending US existing-home sales, hitting a five-month peak. This surge suggests that the recent decline in mortgage rates is playing a role in stabilizing the resale market.
According to data released by the National Association of Realtors (NAR), the index of contract signings surged by 8.3% to reach 77.3, bouncing back from a record low the previous month. This increase, the largest since mid-2020, surpassed all expectations outlined in a Bloomberg survey of economists.
“The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices,” Lawrence Yun, the chief economist at NAR. “Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand.”
Despite 30-year fixed mortgage rates remaining below 7%, a sustained decline is required to encourage more homeowners to list their properties, especially those financed at lower levels. A limited inventory of previously owned homes will continue to pose challenges for the resale market to pick up momentum until that trend develops.
The scarcity of listings has contributed to keeping existing-home prices high, although builders have stepped in to address the shortfall with new construction. By the end of 2023, the number of new homes available for sale reached its highest point in over a year, leading to a decline in prices.
The report on pending-home sales serves as a leading indicator for existing-home sales, given that houses typically go under contract one to two months before finalizing a sale. NAR’s economic outlook anticipates a 13% increase in sales for the year, following an 18.7% slump in 2023.
In the regions, the report showed a notable increase in the index of contract signings for existing homes, with the South experiencing a jump to nearly 12%, marking its biggest increase since June 2020. Pending sales also saw substantial gains in the West, up 14%, and the Midwest, up 5.6%.
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