After four consecutive months of increases, pending home sales in December fell 5.5% compared to November, according to the National Association of Realtors’ (NAR) pending home sales index.
The number of transactions decreased month over month in all four regions of the country. The most significant drop occurred in the West, where activity fell 10.3% from November, and was down 5.1% from December 2023. The Northeast, which had been a strong performer for much of 2024, saw pending home sales fall 8.1% from the previous month, and decrease 1.3% from the previous December.
Midwest pending sales dropped 4.9% for the month, and 6.9% from the previous year. The South slipped 2.7% in December and decreased 5.1% from a year ago.
The pending home sales index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed.
NAR Chief Economist Lawrence Yun said contract activity fell more sharply in the high-priced regions of the Northeast and West, where elevated mortgage rates have reduced affordability. While job gains tend to have greater impact in more affordable regions, he said it was unclear if heavier-than-usual winter precipitation impacted the timing of purchases.
“After four straight months of gains in contract signings, one step back is not welcome news, but it is not entirely surprising,” Yun said. “Economic data never moves in a straight line. High mortgage rates have not significantly dented housing demand due to greater numbers of cash transactions.”
First American Deputy Chief Economist Odeta Kushi noted that another leading indicator, purchase mortgage applications, showed a modest increase in December and so far in January, a positive sign for home sales. But Kushi acknowledged that home prices and affordability remain top issues for the industry.
“Affordability challenges remain, with national home prices reaching another record high in December alongside elevated mortgage rates,” Kushi said. “Despite the difficult conditions, there are some signs of resilient demand and pockets of activity may emerge as rising inventory in some areas could ease price pressures and offer more options for buyers and sellers.”