- Pending home sales increased 8.3% in December.
- Month over month, contract signings grew in the Midwest, South and West but reduced in the Northeast.
- Compared to one year ago, pending home sales decreased in the Northeast but improved in the Midwest, South and West.
WASHINGTON (January 26, 2024) – Pending home sales in December elevated 8.3%, according to the National Association of REALTORS®. The Midwest, South and West posted monthly gains in transactions while the Northeast recorded a loss. The Midwest, South and West also registered year-over-year increases while the Northeast had a decline in transactions compared to last year.
The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – increased to 77.3 in December. Year over year, pending transactions were up 1.3%. An index of 100 is equal to the level of contract activity in 2001.
"The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices," said Lawrence Yun, NAR chief economist. "Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand."
NAR Quarterly U.S. Economic Forecast
NAR also released its Economic Outlook as of January 2024, projecting a 13% increase in existing-home sales in 2024 (from 2023) to 4.62 million and a 15.8% increase in 2025 (from 2024) to 5.35 million. The annual median home price is expected to rise 1.4% to $395,100 in 2024, and then increase 2.6% to $405,200 in 2025.
"Home sales are projected to rise significantly in each of the next two years as the market steadily returns to normal sales activity," added Yun.
The Federal Reserve will likely cut interest rates four times. The 30-year fixed mortgage rate will bounce along the 6% to 7% range for most of the year.
NAR forecasts that due to sizable growth in apartment construction over the past three years, rent growth will calm, which will help bring consumer price inflation to less than 3% in 2024.
Pending Home Sales Regional Breakdown
The Northeast PHSI dropped 3.0% from last month to 62.3, a decline of 3.9% from December 2022. The Midwest index increased 5.6% to 80.5 in December, up 4.3% from one year ago.
The South PHSI jumped 11.9% to 93.0 in December, rising 1.5% from the prior year. The West index surged 14.0% in December to 61.0, up 1.5% from December 2022.
About the National Association of REALTORS®
The National Association of REALTORS® is America's largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics.
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*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.
Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.
The index is based on a sample that covers about 40% of multiple listing service data each month. 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: Existing-Home Sales for January will be released February 22. The next Pending Home Sales Index will be released February 29. All release times are 10 a.m. Eastern. View the NAR Statistical News Release Schedule.