Contracts signed for the purchase of existing homes in the United States rose in January in the largest monthly increase since June 2020, as the housing market prepares for a rebound.
The National Association of Realtors’ estimate of pending home sales rose 8.1% to 82.5 in January, better than the 1.0% estimate by Bloomberg economists, according to data released by the association on Monday. On a year-over-year basis, however, pending transactions are down about 24%.
The index, which is a leading indicator of the health of the housing market, shows how the market has experienced a downturn this year, as a result of falling home prices and rising housing prices.
“Buyers responded to better affordability from falling mortgage rates in December and January,” NAR chief economist Lawrence Yun said in a statement.
According to NAR, the group expects the economy to remain strong with more jobs added this year and next, with 30-year fixed mortgage rates on track to decline to an average of 6.1% in 2023 and 5.4% in 2024.
Yun said he expects annual domestic sales to decline 11.1% in 2023 to a total of 4.47 million units before jumping 17.7% in 2024 to a total of 5.26 million units. NAR projects new home sales will fall 3.7% annually in 2023 before increasing 19.4% in 2024.
“Home sales are likely to slow down in the first quarter of this year, before making further progress,” Yun added. “But annual gains in home sales will not occur until 2024. In the meantime, home prices will remain stable in most parts of the country with little change in local home prices.”
Signing of the agreement has increased in every region. During the sales period it increased by 6.0% in the Northeast, 7.9% in the Midwest, 8.3% in the South, and 10.1% in the West. Pending home sales are down in all regions compared to a year ago.
Yun added, “There was more shortage in the West because of low housing prices, while there was more in the South because of the increase in jobs in the region.”
These figures occurred in a month when mortgage rates stabilized, the labor market remained resilient, and inflation slowed. The average 30-year mortgage rate is back on the decline, reaching around 6% at the end of January compared to mid-November last year, which was around 7%.
Chen Zhao, Redfin’s Head of Economic Research wrote that “When prices are rising and falling in the sunset, many buyers give up because they may wake up one day after finding their dream home to a triple-digit increase in in the possibility of paying them every month,” said Chen Zhao. notice. “Now they have a better understanding of how their budget will reach the neighborhoods and homes they can afford.”
Separately, some data shows that new home sales are rising while existing home sales are falling. The reason: More former homeowners are sitting on low-cost mortgages, making them hesitant to lower their selling price.
Builders, meanwhile, are pulling tools out of their toolbox to help move things. And it appears to be working. For example, homebuilder PulteGroup ( PHM ) is offering its 30-year fixed rate as low as 4.25 percent this quarter and plans to increase rates on new construction.
“Builders not only use incentives to increase sales, such as cashback, reward points and discounts, but they offer upgrades and other quality features, essentially giving the owner buy an additional home for the same amount of money they originally had. Odeta Kushi, First Deputy Chief Economist of the United States, told Yahoo Finance in a statement.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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