Buyers responded to better affordability from lower rates and prices
Pending home sales continued to improve in January as homebuyers slowly returned to the market thanks to lower rates, according to the National Association of Realtors.
NAR’s pending home sales index – based on contract signings – increased 8.1% from the previous month to 82.5 in January. Compared to a year ago, pending transactions were down by 24.1%.
“Pending home sales improved for a second month in a row in January 2022, demonstrating the strong influence of more favorable mortgage rates,” said NerdWallet home expert Kate Wood. “As rates dropped from the peaks they hit in late October and early November, home buyers trickled back into the market. Whether this trend will continue depends not only on mortgage rates but also on the broader economic outlook for the US.”
NAR chief economist Lawrence Yun noted that “buyers responded to better affordability from falling mortgage rates in December and January.”
The trade association expects a stronger labor market throughout 2023 and 2024, with the popular 30-year mortgage rate steadily falling to an average of 6.1% in 2023 and 5.4% in 2024.
With strong job gains and a lower interest rate environment, Yun anticipates an 11.1% decline in annual existing-home sales, down to 4.47 million units before jumping 17.7% in 2024 to 5.26 million units. As for new home sales, NAR projects a 3.7% year-over-year drop in 2023 before growing 19.4% in 2024.
Median existing-home prices are projected to drop by 1.6% this year to $380,100 before bouncing back by 3.1% to $391,800 next year. NAR estimates national median new-home prices to rise 1.3% to $461,000 and continue that increase in 2024 to $474,000, up 2.8% due to higher land and construction materials costs.
“Home sales activity looks to be bottoming out in the first quarter of this year before incremental improvements will occur,” Yun said. “But an annual gain in home sales will not occur until 2024. Meanwhile, home prices will be steady in most parts of the country with a minor change in the national median home price.”
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