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Homebuyers are retreating from the market as pending home sales declined in December, reversing the previous four months of growth, according to new data released by the National Association of Realtors on Thursday.
The Pending Home Sales Index (PHSI), which tracks contract signings as a measure of future home sales, fell 5.5 percent to 74.2 in December. Year-over-year contract signings also dropped by 5.0 percent.
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NAR Chief Economist Lawrence Yun noted that this shift isn’t entirely unexpected because “economic data never moves in a straight line.”
Lawrence Yun
“After four straight months of gains in contract signings, one step back is not welcome news, but it is not entirely surprising,” Yun said. “High mortgage rates have not significantly dented housing demand due to greater numbers of cash transactions.”
All four U.S. regions registered declines in pending home sales compared to November, with the West experiencing the sharpest drop. Contract signings also continued their year-over-year decline, with the Midwest now leading in losses.
In the Midwest, the PHSI dropped 4.9 percent to 74.3 in December, reflecting a 6.9 percent decline from December 2023. The Northeast saw an 8.1 percent monthly decline to 62.3, down 1.3 percent from the previous year.
In the South, the PHSI decreased by 2.7 percent to 90.6 in December, a 5.1 percent drop from the previous year, while the West saw the most significant monthly decline, falling 10.3 percent to 57.7, also down 5.1 percent from December 2023.
“Contract activity fell more sharply in the high-priced regions of the Northeast and West, where elevated mortgage rates have appreciably cut affordability,” Yun explained. “Job gains tend to have greater impact in more affordable regions. It is unclear if heavier-than-usual winter precipitation impacted the timing of purchases.”
