Pending Home Sales Rose 2.5% in December

Washington, DC, January 27, 2023-The Pending Home Sales Index (PHSI)-a forward-looking indicator of home sales based on contract signings-improved 2.5% to 76.9 in December, the first increase since May 2022. Year-over-year, pending transactions dropped by 33.8%. An index of 100 is equal to the level of contract activity in 2001.

“This recent low point in home sales activity is likely over,” said NAR chief economist Lawrence Yun. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”

The Northeast PHSI dropped 6.5% from last month to 64.7, a decrease of 32.5% from December 2021. The Midwest index shrank 0.3% to 77.6 in December, a decline of 30.1% from one year ago.

The South PHSI rose 6.1% to 94.1 in December, dropping 34.5% from the prior year. The West index advanced 6.4% in December to 58.6, decreasing 37.5% from December 2021.

“The new normal for mortgage rates will likely be in the 5.5% to 6.5% range,” Yun added. “Job gains will steadily become important in driving local home-sales markets. The South, in particular, is set to outperform the rest of the country, thanks primarily to better job market conditions in this part of the country compared to other regions.”