Pending Home Sales Surge Most Since COVID-Lockdowns In December As Rates Tumbled

Existing home sales tumbled to record lows (SAAR) in December, but new home sales rebounded (as new home prices rose), and analysts expect pending home sales to increase modestly in December (but be down on the year).

Well it did increase… spiking a ridonculous 8.3% MoM in December (from a downwardly revised 0.3%MoM decline in November). The rebound was not quite enough to turn sales green, ending -1% YoY…

That was the best MoM jump since June 2020 (but the 25th month in a row of YoY declines).

Source: Bloomberg

“The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices,” Lawrence Yun, NAR’s chief economist, said in a statement.

“Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand.”

And that crazy jump – as mortgage rates declined – pushed 2023’s annual pending home sales index HIGHER than 2022’s!

Source: Bloomberg

The NAR’s report showed the index of contract signings for existing homes jumped nearly 12% in the South, the biggest US housing market. That was the largest advance since June 2020. Pending sales also surged 14% in the West and climbed 5.6% in the Midwest.

The jump in pending sales reflects perfectly on the plunge in mortgage rates…

Source: Bloomberg

The pending-home sales report is a leading indicator of existing-home sales given houses typically go under contract a month or two before they’re sold.

Those sales are expected to increase 13% this year, according to NAR’s economic outlook, but as the chart shows, that trend of lower rates has stalled in January.