The National Association of Realtors reported on Thursday a surprising downturn in U.S. pending home sales for December, following a streak of four consecutive monthly increases. In December, the pending home sales index dropped sharply by 5.5 percent to 74.2, contrasting with a 1.6 percent rise in November, which was subsequently revised downward to 78.5.
Analysts had anticipated a modest 0.4 percent rise in pending home sales, rather than the 2.2 percent gain initially reported for the previous month. For context, a pending home sale occurs when a contract has been signed but is yet to be finalized, typically requiring four to six weeks for closure.
"While the decline in contract signings after four months of continuous growth is unwelcome, it is not entirely unexpected," commented Lawrence Yun, NAR's Chief Economist. "Economic indicators often fluctuate."
He further noted that "High mortgage rates have not deterred housing demand significantly due to a higher frequency of cash transactions."
This sharp decline in pending home sales was observed across all four regions of the United States, with the West and Northeast experiencing the most significant downturns. Specifically, pending home sales plunged by 10.3 percent in the West and 8.1 percent in the Northeast. Meanwhile, the Midwest and South saw declines of 4.9 percent and 1.7 percent, respectively.
"Contract activity fell more sharply in high-cost areas like the Northeast and West, where elevated mortgage rates have considerably reduced affordability," Yun stated. "In contrast, job gains are more impactful in regions with greater affordability."
