Pending home sales ended 2022 on a positive note. After six consecutive months of declines, the Pending Home Sales Index rose 2.5% month over month in December to a reading of 76.9, according to data released Friday by the National Association of Realtors (NAR).
“This recent low point in home sales activity is likely over,” Lawrence Yun, NAR’s chief economist, said in a statement. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”
Despite the monthly increase, pending home sales are down 33.8% compared to December 2021. An index of 100 is equal to the level of contract activity in 2001.
“We now have multiple leading housing indicators that are pointing to modestly higher sales activity. Mortgage applications have been trending higher alongside lower mortgage rates, pending-home sales are up, and home builder confidence increased in January.” Odeta Kushi, First American’s deputy chief economist, said in a statement.“Interested buyers are out there. From a financial perspective, the decision to buy a home comes down to a payment-to-paycheck calculation, and lower mortgage rates may help to reduce the mortgage payment while higher incomes can increase one’s monthly paycheck.”
On a year-over-year basis, all four of the major U.S. regions recorded declines, with the West recording the largest yearly decline at 34.5%, down to a reading of 58.6.
Two of the four regions experienced declines month over month, with the Northeast (64.7) and the Midwest (77.6) falling 6.5% and 0.3%, respectively. The South (94.1) and the West rose 6.1% and 6.4%, respectively.
“The new normal for mortgage rates will likely be in the 5.5% to 6.5% range,” Yun added. “Job gains will steadily become important in driving local home-sales markets. The South, in particular, is set to outperform the rest of the country, thanks primarily to better job market conditions in this part of the country compared to other regions.”