Pending home sales rose 8.3% month over month in December, according to the newest data from the National Association of Realtors (NAR). It was the largest monthly jump in pending home sales since 2020.
NAR’s Pending Home Sales Index (PHSI) increased to 77.3 in December, up from 71.6 in November. On a year-over-year basis, pending sales were up 1.3%. For comparison, the index is benchmarked at a reading of 100 based on 2001 contract activity.
“The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices,” NAR chief economist Lawrence Yun said in a statement. “Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand.”
New home sales, another measure of contract signings, rose 8% in December on the back of declining mortgage rates.
According to an NAR outlook, home sales are projected to rise significantly in 2024 and 2025 as the housing market steadily returns to normal. The trade organization projects a 13% increase in existing home sales between 2023 and 2024 for an annualized pace of 4.62 million and a 15.8% increase between 2024 and 2025 to a pace of 5.35 million units.
Meanwhile, the national median home price is expected to rise 1.4% this year to $395,100, with a further increase of 2.6% in 2025 to reach $405,200.
NAR forecasts the Federal Reserve to cut benchmark interest rates four times in 2024, with the expectation for mortgage rates to bounce along the 6% to 7% range. The trade group also predicts that rent growth will ease due to sizable growth in apartment construction over the past three years.
Regional data
Pending home sales improved most significantly in the West, South and Midwest in December. These regions posted respective monthly increases of 14%, 11.9% and 5.6%. They also registered year-over-year increases of 1.5%, 1.5% and 4.3%, respectively. The Northeast was the only region to see a decline in contract signings, with a drop of 3% month over month and 3.9% year over year.
Looking ahead
Confronted with limited existing home inventory, many buyers have pivoted to newly constructed homes. But new listings activity grew by 9.1% nationally in December, according to Realtor.com economic research analyst Hannah Jones. Additionally, mortgage rates fell toward the end of 2023, raising hopes for the 2024 housing market. Mortgage applications, on average, are increasing month over month, according to Odeta Kushi, deputy chief economist at First American Financial Corp. They increased by nearly 8% between November and December, and are poised to increase by 10% between December and January.
“A simple analysis based on the historical relationship between mortgage applications and existing-home sales indicates that existing-home sales should accelerate,” Kushi said in a statement. “While the level of sales activity remains low, the positive growth is a welcome and promising sign for the housing market.”
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