US pending home sales unexpectedly rose 8.1% month-over-month in January of 2023, the biggest increase since June 2020 and just the second rise since May. The sales number was way ahead of market forecasts of a 1.0% rise. Sales contracts increased in all four regions. For perspective year-on-year, pending home sales are down 24.1%. In February however we have seen a resurgence in mortgage rates which could delay a much-awaited housing market turnaround. We had seen in the weekly mortgage applications reports that the pullback in mortgage rates has spurred some renewed demand among home buyers.
We saw positive signs Friday, new home sales in January rose +7.2% m/m vs. +0.7% estimate. Noticeably they were revised up to +7.2% in prior month (rev up from +2.3%). The median new home price fell by 0.7% y/y to $427,500: the first decline since August 2020. Months’ supply fell from 8.7 to 7.9.
National Association of Realtors® Pending Home Sales
January 2023 Highlights
- Pending Home Sales (M/M) Jul: -1.0% (est -2.6%; prev R -8.9%)
- Pending Home Sales NSA (Y/Y): -22.5% (est -21.4%; prev R -20.1%)
Pending Home Sales by Region
- Northeast PHSI rose 6.0% from last month to 68.7, a decline of 19.8% from January 2022.
- Midwest index grew 7.9% to 83.3 in January, a drop of 21.1% from one year ago.
- South PHSI increased 8.3% to 99.2 in January, dipping 24.7% from the prior year.
- West index elevated 10.1% in January to 66.2, diminishing 29.3% from January 2022.
- “An extra bump occurred in the West region because of lower home prices, while gains in the South were due to stronger job growth in that region,”
“Buyers responded to better affordability from falling mortgage rates in December and January,”
“Home sales activity looks to be bottoming out in the first quarter of this year, before incremental improvements will occur,” Yun said. “But an annual gain in home sales will not occur until 2024. Meanwhile, home prices will be steady in most parts of the country with a minor change in the national median home price.” said NAR Chief Economist Lawrence Yun.”
The 30-year fixed mortgage rate increased to an average of 6.50% last week from 6.32% in the prior week, according to data from mortgage finance agency Freddie Mac. The third straight weekly increase lifted the rate to a three-month high. The average 30-year fixed mortgage rates with conforming loan balances (($726,200 or less) increased by 23bps to 6.62% in the week ended February 17th, 2023, the highest level since mid-November. Mortgage applications decreased 13.3 percent from one week earlier the MBA Weekly Mortgage Applications Survey for the week ending February 17, 2023.
About Pending Home Sales
*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, though the sale usually is finalized within one or two months of signing.
Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.
The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
Source: NAR
From The TradersCommunity News Desk