Pending home sales slow down in January

All four major regions of the nation posted a decline in year-over-year pending home sales activity, according to the National Association of Realtors (NAR).

The Pending Home Sales Index (PHSI) for January declined 5.7% from the previous month to a level of 109.5.  Year-over-year transactions increased 9.5%, however. The index is a forward-looking indicator of contract signings with a level of 100 equal to the level of contract activity in 2001.

A big piece of January’s decline is the limited availability of affordable homes on the market.

“With inventory at an all-time low, buyers are still having a difficult time finding a home,” said Lawrence Yun, chief economist of the NAR.

A supply shortage is also mixing with escalating home prices and rising interest rates.  “Given the situation in the market – mortgages, home costs, and inventory – it would not be surprising to see a retreat in housing demand,” Yun said.

Given Russia’s invasion of Ukraine, and its impact on the global oil supply, the end result is like to be additional inflation, rising fuel pump prices, and higher increases in mortgage rates.

“There’s also the possibility that investors may flee toward safer U.S. Treasury bonds, which may result in temporary short-term relief to interest rates,” Yun added.

Here’s how the PHSI performed on a regional basis.

• In the Northeast, the PHSI dropped 12.1% to 84.3 in January, a 16.7% decrease from a year ago.
•  In the Midwest, the index fell 5.9% to 104.4 last month, down 5.9% from January 2021.
• Pending home sales transactions in the South slipped 6.3% to an index of 134.6 in January, down 8.7% from January 2021. 
• The index in the West increased 1.5% in January to 95.2, down 9.7% from a year prior.

Yesterday, the U.S. Census Bureau and the Department of Housing and Urban Development, reported that new home sales for January fell  4.5% to a seasonally adjusted annual rate of 801,000 from the revised December rate of 839,000. The latest figure is also a 19.3% drop from the January 2021 estimate of 993,000.

The latest Monthly New Residential Sales report also revealed that the median sales price for new homes sold in January was $423,300, jumping 7% from the December 2021 median price of $395,500.