Pending home sales drop in January

Pending home sales declined in January, the National Association of Realtors reported this morning.

The latest Pending Home Sales Index (PHSI) fell 4.9% to a reading of 74.3 for the month compared to the December 2023 level. On a year-over-year basis, pending transactions dropped 8.8%.

An index of 100 is equal to the level of contract activity in 2001. The index is a forward-looking indicator based on contract signings.

“The job market is solid, and the country’s total wealth reached a record high due to stock market and home price gains,” said NAR Chief Economist Lawrence Yun. “This combination of economic conditions is favorable for home buying. However, consumers are showing extra sensitivity to changes in mortgage rates in the current cycle, and that’s impacting home sales.”

Here’s how pending home sales performed by region:

• The Northeast PHSI increased 0.8% from last month to 63.6 but  declined 5.5% from January 2023. 

• The Midwest index decreased 7.6% to 73.7 in January and is down 11.6% from one year ago.

• The South PHSI declined 7.3% to 88.5 in January, falling 9% from the prior year. 

• The West index rose 0.5% in January to 61.1 but is down 7% from January 2023.

“Southern states and those in the Rocky Mountain time zone experienced faster job growth compared to the rest of the country,” added Yun. “As a result, long-term housing demand is increasing more significantly in these regions. However, the timing and number of purchases will largely depend on the prevailing mortgage rates and inventory availability.”

The National Association of Realtors represents more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.