Pending Home Sales Slip for Second Consecutive Month in December

The National Association of Realtors® (NAR) reported on Thursday (1-27-22) that their Pending Homes Sales Index (PHSI), which is based on signed real estate contracts, not actual closings, for existing single-family homes, condominiums, and co-ops, declined -3.8% in December to a reading of 117.7. An index of 100 is equal to the level of contract activity in 2001. Year-over-year contract signings have also declined -6.9%. The December decline marks the second consecutive monthly drop-in activity.

All four major U.S. regions posted both month-over-month and year-over-year declines in contract activity.

In a statement prepared to accompany December’s PHSI, Lawrence Yun, NAR’s chief economist said, “Pending home sales faded toward the end of 2021, as a diminished housing supply offered consumers very few options. Mortgage rates have climbed steadily the last several weeks, which unfortunately will ultimately push aside marginal buyers.”

Even with December’s slowdown in transactions, Yun says last year was an overall great period for housing in terms of sales and price appreciation.

Yun added that “The market will likely endure a minor reduction in sales as mortgage rates continue to edge higher.” Yun forecasts the 30-year fixed mortgage rate to jump to 3.9% by the fourth quarter and existing-home sales to dip by 2.8% to 5.95 million units.