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The National Association of Realtors (NAR) has released its monthly index, showing that pending home sales in the US rose 8.1% in January. This is the second consecutive month of sales growth, driven by lower home prices. Pending home sales reflect transactions for which a contract has been signed for an existing home but the sale has not yet closed. While this news is encouraging, there are concerns about the state of the housing market going forward.
The NAR has predicted that existing-home sales will drop by 11.1% in 2023, with home prices expected to fall nationally by 1.6% to $380,100. This is due to the recent increase in mortgage rates, which is already leading to a slowdown in demand. Transactions were down by 24.1% compared to a year earlier.
Economists view pending home sales as an indicator of the direction of existing-home sales in the coming months. While the recent increase in sales is positive news, there are concerns about the impact of rising mortgage rates on the housing market. Analysts polled by the Wall Street Journal had forecast the pending home sales index to rise by 0.9%, meaning that the 8.1% growth seen in January is better than expected.
Compared with a year earlier, transactions were down by 24.1%. Pending sales rose in all four regions of the country, led by the West, which saw a 10.1% increase in January. However, the West also saw the largest drop in pending home sales since last January, by 29.3%.
The NAR expects existing-home sales to drop in 2023 by 11.1%, to a total of 4.47 million units. They expect home sales to improve only in 2024 when they anticipate the number to jump by 17.7% to 5.26 million units sold. The industry group also expects sales of new homes to fall 3.7% in 2023, followed by a sharp increase in sales of 19.4% in 2024.
Lawrence Yun, chief economist at NAR, said, "Home sales activity looks to be bottoming out in the first quarter of this year before incremental improvements will occur. But an annual gain in home sales will not occur until 2024. Meanwhile, home prices will be steady in most parts of the country with a minor change in the national median home price."
In conclusion, the rise in US pending home sales in January is a positive sign for the housing market. However, concerns about rising mortgage rates and a potential slowdown in demand mean that the outlook for the market is uncertain. The NAR predicts that existing-home sales will fall in 2023, but hopes that sales will rebound in 2024. It remains to be seen how the housing market will perform in the coming months and years, but it's clear that factors such as mortgage rates and home prices will play a crucial role.