Pending home sales barely increase, driven by surge in the Northeast
There’s a silver lining for potential homebuyers
After a series of declines, pending home sales, while small, posted a slight increase, largely fueled by a surge in the Northeast, according to the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, marginally increased 0.1% to 106.8 in December from a downwardly revised 106.7 in November and is now 4.2% above December 2014 (102.5).
This also marks 16 months consecutive year-over-year increases.
Lawrence Yun, NAR chief economist, explained that warmer than average weather and more favorable inventory conditions compared to other parts of the country encouraged more households in the Northeast to make the decision to buy last month.
However, without the Northeast, Yun said that contract activity closed out the year on stable footing but lost some momentum.
"Overall, while sustained job creation is spurring more activity compared to a year ago, the ability to find available homes in affordable price ranges is difficult for buyers in many job creating areas. With homebuilding still grossly inadequate, steady price appreciation and tight supply conditions aren't going away any time soon," said Yun.
Broken up regionally, the PHSI in the Northeast, which led the way, increased 6.1% to 97.8 in December, and is now 15.3% above a year ago.
In the Midwest, the index fell 1.1% to 103.6 in December, but is still 3.6% above December 2014.
Pending home sales in the South dipped 0.5% to an index of 119.3 in December but is 1.0% higher than last December, while the index in the West decreased 2.1% in December to 97.5, but remains 3.4% above a year ago.
On a positive note, Yun said, "The silver lining from the market turmoil in recent weeks is the fact that mortgage rates have slightly declined. Buyers looking to close on a home before the spring buying season begins may be rewarded with a mortgage rate at or below 4%."
According to the latest Freddie Mac Primary Mortgage Market Survey, mortgage rates once again moved lower amid continuous market turmoil. This week marked the fourth consecutive week that mortgage rates moved lower.