Drop is biggest in five months
Pending sales of previously-owned homes in the US fell last month by the highest amount since August, according to new National Association of Realtors (NAR) data.
The association said its gauge of contract signings fell by 4.9% in January to 74.3 as steep borrowing costs and interest rates continued to weigh down on homebuying activity and demand.
January’s decline marked a surprisingly large dip, exceeding the downturn expected by economists surveyed by Bloomberg.
NAR’s chief economist Lawrence Yun said in remarks accompanying the release that high mortgage costs were the main barrier to homebuying intentions in the present market.
“This combination of economic conditions is favorable for homebuying,” Yan said. “However, consumers are showing extra sensitivity to changes in mortgage rates in the currently cycle, and that’s impacting home sales.
Pending home sales in January dropped 4.9%. The Northeast and West posted monthly gains in transactions while the Midwest and South recorded losses. https://t.co/zLH4afgu1O
— National Association of REALTORS® (@nardotrealtor) February 29, 2024
First American chief economist Mark Fleming said the news was unsurprising, with rising rates helping squeeze affordability and discourage sellers.
“Existing home sales advanced modestly in January because of sales pending in December. Expect existing home sales to retreat in February if this relationship between existing and pending (advanced one month) holds true,” he added. “I see no reason why it won.”
In the South, the index of contract signings fell by 7.3%, with the Midwest posting a 7.6% decline. The Northeast and West saw the contract signings index increase, by 0.8% and 0.5% respectively.
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