Despite improving market factors, pending home sales declined in January on a monthly and annual basis. However, several economists said the promotion was likely to come this spring and urged agents to remain calm.
Home price growth has slowed, inventory is rising and mortgage rates are lower than last year. Enough to throw a homebuyer aside, right?
Wrong.
The number of pending home sales in January, which reflects the signing of contracts for unfinished homes, decreased by 0.8% from the previous month and by 0.4% from the same month last year. On a regional basis, monthly pending home sales increased in the Midwest and West, but decreased in the Northeast and South. Meanwhile, annual pending home sales increased in the South and West, but decreased in the Northeast and Midwest.
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Lawrence Yun, chief economist at the National Association of Realtors, said stronger market tailwinds aren’t pulling homebuyers closer to shore.
Lawrence Yun | Chief Economist, National Association of Realtors
“Improving affordability conditions have not yet triggered further purchasing activity,” he said in a written statement Thursday. “With mortgage rates approaching 6%, an additional 5.5 million households who couldn’t qualify for a mortgage a year ago will be able to qualify for today’s lower rates. Most newly eligible households won’t take action right away, but based on past experience, about 10% could enter the market, potentially adding about 550,000 new homebuyers this year compared to last year.”
Sam Williamson, senior economist at First American, said January’s pending sales numbers foreshadow weak comparable sales in February, but metro-level data offers some signs of hope.
“January data is worth treating with caution, as the seasonal economic slowdown and winter weather can negatively impact both contract activity and closings, and existing home sales also recorded a significant decline in January,” Williamson said in an emailed statement. “The slower pace also gave supply more time to catch up for the spring home buying season. Single-family inventory increased 4.7% from December, and months of supply increased from a seasonally adjusted 3.8 months to 4.2 months.”
Sam Williamson, Senior Economist, First American
He added: “More homes on the market will give buyers more choice and help reduce price pressure as activity picks up.” “Several metropolitan areas also posted strong gains for the year. Phoenix, Boston and Charlotte each rose about 11%, as did San Francisco and Oklahoma City, a sign that buyer interest is starting to rekindle in areas where conditions are improving.”
Lisa Sturtevant, chief economist at Bright MLS, said homebuying activity is likely to improve this spring as homebuyers (hopefully) leverage their market power.
Dr. Lisa Sturtevant | Bright MLS
“We are likely to see more homebuying activity in the coming months as inventory improves,” she emailed Inman. “Spring is typically the busiest market, when homes sell fastest and offers come in above list price. But this year’s buyers will have more influence than in recent years.”
“Sellers need to get their home ‘move-in ready’ and price it appropriately if they want to sell quickly.”
Email Marian McPherson
