Residential Real Estate News
Pending Home Sales Dive Across America in December
Amidst 7 Percent Mortgage Rates Hobbling the U.S. Market
The National Association of Realtors reported this week a significant decline in U.S. pending home sales for December 2024, breaking a four-month streak of increases. The Pending Home Sales Index (PHSI) decreased by 5.5% to 74.2, with a year-over-year decline of 5.0%.
Regional Breakdown
All four U.S. regions experienced month-over-month declines in pending home sales:
- West: Largest drop of 10.3%, down 5.1% year-over-year
- Northeast: Fell 8.1%, down 1.3% from December 2023
- Midwest: Decreased 4.9%, down 6.9% year-over-year (largest annual decline)
- South: Slipped 2.7%, down 5.1% from a year ago
Factors Influencing the Decline
- Mortgage Rates: A surge in mortgage rates likely contributed to the decrease in pending sales. Rates rose from 6.68% on December 6 to 7.14% by December 19, 2024.
- Regional Affordability: NAR Chief Economist Lawrence Yun noted that high-priced regions like the Northeast and West were more affected due to reduced affordability from elevated mortgage rates.
- Seasonal Factors: Yun also mentioned the possibility of heavier-than-usual winter precipitation impacting purchase timing.
Despite the decline, Yun emphasized that high mortgage rates haven't significantly impacted housing demand due to an increase in cash transactions. The PHSI, while down, remains above the cyclical low point of 70.2 recorded in July 2024.
This unexpected drop in pending home sales suggests a potential slowdown in the housing market as we move into 2025, though it's important to note that economic data rarely moves in a straight line, as Yun pointed out.
