Pending home sales increased in January, a welcome rebound after a decline in December.
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Pending home sales rose in January, reversing course from December’s decline, according to the National Association of Realtors. Only the West showed a minor drop in month-over-month contract activity, while the other three major regions—the Northeast, South and Midwest—saw pending home sales grow. Year-over-year pending home sales activity was up nationally compared to a year ago. Pending sales represent homes that have a signed contract to purchase on them but have yet to close.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, grew 5.2% to 108.8 in January. Year-over-year contract signings increased 5.7%.
January’s solid activity, the second-highest monthly figure in over two years, was due to the good economic backdrop and exceptionally low mortgage rates, according to Lawrence Yun, NAR’s chief economist.
Amid a wave of selling in the stock market driven by investor concerns over the impact of coronavirus outbreaks around the world, mortgage rates are hitting record lows.
“With housing starts hovering at 1.6 million in December and January, along with the favorable mortgage rates, among other factors, 2020 has so far presented a very positive sales climate,” Yun said. “Moreover, the latest stock market correction could provide exceptional, even lower mortgage rates for a few weeks, and that would help bring about a noticeable upturn in the coming months.”
Yun said the housing market is still lacking in inventory, noting December’s and January’s combined supply was at the lowest level since 1999. “Inventory availability will be the key to consistent future gains.”
Pointing to data from active listings at realtor.com, Yun says the year-over-year increases show a strong desire for homeownership. Markets drawing some of the most significant buyer attention include Fort Wayne, Indiana; San Francisco; Sacramento, California; Lafayette, Indiana; and San Jose, California.
First-time buyers were responsible for 32% of existing home sales in January, up from 31% in December and up from 29% in January 2019.
“It is good to see first-time buyers slowly stepping into the market,” Yun said. “The rise in the homeownership rate among the younger adults, under 35, and minority households means an increasing number of Americans can build wealth by owning real estate. Still, in order to further expand opportunities, significantly more inventory and home construction are needed at the affordable price points.”