Sharp Surge In Pending Home Sales In January

Mortgage News March 13, 2023

The housing market in the United States has been on a rollercoaster ride over the past few years due to the pandemic, but there is good news for potential buyers. Pending home sales increased for the second month in a row in January, with the National Association of Realtors® reporting an 8.1% increase in their Pending Home Sales Index (PHSI) to a reading of 82.5. This is the largest increase since the rebound in June 2020 from the pandemic’s initial impact.

The PHSI is a leading indicator of existing home sales over the following one to two months and is based on contracts to purchase existing single-family homes, townhouses, condominiums, and cooperative apartments. The increase in pending home sales is a positive sign for the real estate market, which had seen a 13-month decline in pending home sales prior to the uptick in December.

NAR Chief Economist Lawrence Yun believes that buyers responded to better affordability resulting from falling mortgage rates in December and January. He expects home sales activity to bottom out in the first quarter of this year, with incremental improvements occurring afterward. However, he does not anticipate an annual gain in home sales until 2024. Yun also predicts that home prices will remain steady in most parts of the country, with only minor changes in the national median home price.

Despite the improving interest rate environment and job gains, annual existing-home sales are forecasted to drop 11.1% this year to a total of 4.47 million units before jumping 17.7% in 2024 to 5.26 million units. New home sales are expected to be slightly more robust, falling 3.7% year-over-year in 2023 before growing 19.4% in 2024.

While all four U.S. regions posted monthly gains, they all saw year-over-year drops in transactions. The Northeast saw an increase of 6.0% in January, while the Midwest grew by 7.9%. Pending sales rose 8.3% in the South, and the West gained by 10.1%. However, all four regions were down compared to the previous year.

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