The U.S. National Association of Realtors revealed on Friday that pending home sales significantly exceeded expectations in December.
The Association's pending home sales index surged 8.3% to 77.3 in December, following a 0.3% decrease to a revised 71.4 in November. Economics experts had predicted a 1.5% increase, contrary to initial unchanged readings reported in the previous month.
"The housing market enjoyed a strong start this year due to lower mortgage rates and stable home prices," stated Lawrence Yun, the chief economist of the National Association of Realtors.
Yun further explained that job growth and income increases contribute to improved housing affordability. However, an increased supply is crucial to meet potential demand.
December's sudden rise in pending home sales was driven by increases of 14.0% and 11.9% in the Western and Southern regions of the U.S., respectively. The West also saw an additional rise of 5.6% in pending sales, while a decrease of 3.0% was noted in the Northeast.
The Association, in its January 2024 Economic Outlook, projected a 13% increase in existing-home sales in 2024 and a further increase of 15.8% in 2025. The median annual home price is forecast to rise by 1.4% to $395,100 in 2024 and by an additional 2.6% to $405,200 in 2025.
"We expect home sales to significantly increase over the next two years as the market gradually returns to normal activity levels," proposed Yun.
Four interest rate cuts by the Federal Reserve are predicted by the Association. It anticipates rental growth to slow down due to a significant increase in apartment construction over the past three years, thus reducing consumer price inflation to less than 3% in 2024.
A separate report by the Commerce Department released on Thursday illustrated a significant recovery in U.S. new home sales for the month of December. The Department reported an 8.0% spike in new home sales to an annual rate of 664,000, recovering from a 9.0% decrease to a revised rate of 615,000 in November. Economists had predicted a 9.3% increase to a rate of 645,000 from the 590,000 initially reported for the previous month.
