Pending home sales in December fell 4.9% from the prior month, the largest decline in almost a decade, according to a report Wednesday from the National Association of Realtors.
The seasonally adjusted index measuring signed contracts fell because of a shortage of homes on the market, according to Lawerence Yun, NAR’s chief economist. It was the largest drop since May 2010, according to the data.
“The state of housing in 2020 will depend on whether homebuilders bring more affordable homes to the market,” Yun said. “Home prices and even rents are increasing too rapidly, and more inventory would help correct the problem and slow price gains.”
Yun said the markets where listing prices are around $250,000 have the strongest demand, including Fort Wayne, Indiana, Burlington, North Carolina, Topeka, Kansas, Pueblo, Colorado, and Columbus, Ohio.
All U.S. regions saw pending home sales fall in December, Yun said. The Northeast, including Massachusetts and New Hampshire, slipped 4.0% and the Midwest dropped 3.6%, the NAR report said.
In the South, pending sales fell 5.5% and the West dropped 5.4%.
The shortage of homes on the market is the worst on record, Yun said. The number of single-family homes for sale dropped to 1.45 million in November, the lowest level for that month in a NAR data series that goes back to 1982. The U.S. has added 96.5 million people in the intervening years.
Homebuilders that were sidelined during the Great Recession are beginning to get back in the game. December’s housing starts spiked to a 13-year high, according to government data.
For all of 2020, builders are expected to break ground on 975,000 single-family homes, according to a Fannie Mae forecast. That would be the highest since 2007.