Pending Home Sales Surge: Promising Sign of Life in Stagnant Market

After record lows, pending home sales see healthy bump, signaling hope for a market plagued by low inventory and high prices.

Pending home sales saw a significant increase last month, bouncing back from a record low in October and remaining flat in November. The National Association of Realtors reported a seasonally adjusted 8.3% increase in pending home sales in December, marking a notable improvement in a market characterized by low inventory and sluggish sales. The West and South regions experienced double-digit gains, with the West seeing a 14% jump and the South experiencing a 12% rise. In the Midwest, pending sales increased by 5.6%, while the Northeast saw a decline of 3%. Compared to the same period a year ago, national pending home sales are up by just 1.3%. However, NAR is forecasting a 13% increase in existing-home sales for 2024, provided that mortgage rates behave as expected.

NAR Chief Economist Lawrence Yun expressed optimism about the market, citing anticipated rate cuts by the Fed, a decrease in mortgage interest rates, and continued delivery of new homes and rentals as contributing factors. The delivery of new inventory has been crucial for buyers, with new construction options accounting for 31.2% of total inventory. Despite limited existing home inventory, new listing activity picked up 9.1% nationally in December, pushing overall for-sale inventory 4.9% higher than the previous year. The increase in pending home sales in December is seen as a promising development in the challenging market, emphasizing the impact of lower mortgage rates on affordability.

However, market conditions continue to pose a hurdle to homeownership for many buyers. CoreLogic Chief Economist Dr. Selma Hepp noted that while many consumers emerged from the pandemic with strong credit scores, they are also aware of the challenges posed by market fundamentals.

The real estate market has shown signs of improvement, with an increase in pending home sales and optimistic forecasts for existing-home sales in the coming year. However, challenges remain, particularly in terms of market conditions and affordability.