High mortgage rates are continuing to push buyers to the sidelines
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Pending home sales in the US slid last month as still-high mortgage rates and home prices continued to weigh down on affordability across the country.
The National Association of Realtors (NAR) said Thursday that contract signings had fallen for the first time since July, dropping 5.5% and declining by more than economists had expected, according to Bloomberg.
The West and Northeast accounted for the most significant monthly decreases, with pending sales in those regions plunging in a month-over-month decrease not seen since 2022.
Mortgage rates remain perched around the 7% mark after seeing a big rebound in the closing months of 2024, while the First American Home Price Index showed 3.9% average growth in US home prices in December.
US home prices grew by 3.9% year-over-year in December 2024, showing a moderation in the market as rising mortgage rates and increased inventory slowed price increases, according to First American’s Home Price Index.https://t.co/mj3mPj6yHE
— Mortgage Professional America Magazine (@MPAMagazineUS) January 29, 2025
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First American deputy chief economist Odeta Kushi said there was still cause for some optimism in the national housing market despite the dip in pending sales last month.
“Affordability challenges remain, with national home prices reaching another record high in December alongside elevated mortgage rates,” Kushi wrote after the release of the NAR data.
“Despite the difficult conditions, there are some signs of resilient demand and pockets of activity may emerge as rising inventory in some areas could ease price pressures and offer more options for buyers and sellers.”
NAR chief economist Lawrence Yun, meanwhile, underlined the effect high mortgage rates had had on pending sales activity, but added that “it is unclear if heavier-than-usual winter precipitation impacted the timing of purchases.”
The Federal Reserve kept its key rate on hold in yesterday’s interest rate announcement, with a robust economy and persistent inflation fueling speculation that mortgage rates could stay around their current level for the remainder of the year.
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