January was a chilly month for pending home sales, according to new data from the National Association of Realtors (NAR).
NAR’s Pending Home Sales Index dropped by 4.9% from December to January, closing the month with a 74.3 reading; an index level of 100 is equal to the level of contract activity in 2001.
Year-over-year, pending transactions were down 8.8%. Contract signings were up month-over-month in the Northeast and West, but all regions recorded year-over-year declines.
“The job market is solid, and the country’s total wealth reached a record high due to stock market and home price gains,” said NAR Chief Economist Lawrence Yun. “This combination of economic conditions is favorable for home buying. However, consumers are showing extra sensitivity to changes in mortgage rates in the current cycle, and that’s impacting home sales. Southern states and those in the Rocky Mountain time zone experienced faster job growth compared to the rest of the country. As a result, long-term housing demand is increasing more significantly in these regions. However, the timing and number of purchases will largely depend on the prevailing mortgage rates and inventory availability.”
Separately, the Mortgage Bankers Association (MBA) reported homebuyer affordability was down last month as the national median payment applied for by purchase applicants increased to $2,134 from $2,055 in December.
“Homebuyer affordability conditions declined in January, with higher home prices pushing loan amounts upward and ultimately offsetting what was a monthly decline in mortgage rates,” said Edward Seiler, MBA’s associate vice president of housing economics and executive director of the Research Institute for Housing America. “Mortgage rates have risen throughout February and will likely continue to hamper affordability and prospective homebuyers’ ability to buy heading into spring.”
