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WASHINGTON (February 29, 2016) — Following the highest average year for the index in nearly a decade1, pending home sales declined to begin 2016 but remained slightly higher than a year ago, according to the National Association of Realtors®. Only the South saw an uptick in contract activity in January.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, declined 2.5 percent to 106.0 in January from an upwardly revised 108.7 in December but is still 1.4 percent above January 2015 (104.5). Although the index has increased year-over-year for 17 consecutive months, last month’s annual gain was the second smallest (September 2014 at 1.2 percent) during the timeframe.

Lawrence Yun, NAR chief economist, says a myriad of reasons likely contributed to January contract signings subsiding in most of the country. “While January’s blizzard possibly caused some of the pullback in the Northeast, the recent acceleration in home prices and minimal inventory throughout the country appears to be the primary obstacle holding back would-be buyers,” he said. “Additionally, some buyers could be waiting for a hike in listings come springtime.”

Existing-home sales increased last month and were considerably higher than the start of 20152, but price growth quickened to 8.2 percent – the largest annual gain since April 2015 (8.5 percent).

While the hope is that appreciating home values will start to entice more homeowners to sell, Yun says supply and affordability conditions won’t meaningfully improve until homebuilders start ramping up production – especially of homes at lower price points.

“First-time buyers in high demand areas continue to encounter instances where their offer is trumped by cash buyers and investors,” adds Yun. “Without a much-needed boost in new and existing-homes for sale in their price range, their path to homeownership will remain an uphill climb.”

Existing-homes sales this year are forecast to be around 5.38 million, an increase of 2.5 percent from 2015. The national median existing-home price for all of this year is expected to increase between 4 and 5 percent. In 2015, existing-home sales increased 6.3 percent and prices rose 6.8 percent.

The PHSI in the Northeast declined 3.2 percent to 94.5 in January, but is still 10.9 percent above a year ago. In the Midwest the index fell 4.9 percent to 101.1 in January, but is still 1.4 percent above January 2015.

Pending home sales in the South inched up 0.3 percent to an index of 121.1 in January but remain 1.3 percent lower than last January. The index in the West decreased 4.5 percent in January to 96.5, but is still 0.4 percent above a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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1In 2015, the Pending Home Sales Index averaged 108.9, the highest since 2006 (111.7) and a gain of 8.0 percent from 2014 (100.8).

2January existing-home sales were 11.0 percent higher than a year ago – the largest year-over-year gain since July 2013 (16.3 percent).

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

NOTE: NAR’s 2016 Home Buyer and Seller Generational Trends report will be released March 9, the next Housing Opportunities and Market Experience (HOME) survey is scheduled for release on March 15, Existing-Home Sales for February will be reported March 21, and the next Pending Home Sales Index will be March 28; release times are 10:00 a.m. ET.