US Pending Home Sales Decline in January Amid Affordability Concerns and Winter Weather

National Pending Home Sales See January Dip

Pending home sales in the United States experienced a decline in January, with a 0.8% decrease from the previous month and a 0.4% reduction compared to January of last year. This data comes from the latest Pending Home Sales Report released by the National Association of REALTORS® (NAR). The Pending Home Sales Index (PHSI) registered at 70.9 for the month, with an index reading of 100 representing the level of contract activity in 2001.

Regional Variations and Contributing Factors

The national decline masked varied regional performances. Month-over-month, pending home sales saw increases in the Midwest and West, while experiencing declines in the Northeast and South. Specifically, the Northeast recorded a 5.7% decrease and the South a 4.5% decline. Year-over-year, sales rose in the South and West but fell in the Northeast (8.3% decline) and Midwest (3.3% decline).

Several factors contributed to the overall slowdown:

• Affordability Concerns: NAR Chief Economist Dr. Lawrence Yun noted that 'Improving affordability conditions have yet to induce more buying activity.'
• Economic Uncertainty: Lisa Sturtevant, chief economist at Bright MLS, highlighted 'affordability concerns and economic uncertainty' as deterrents for buyers.
• Winter Weather: A 'massive winter storm' that impacted 40 states in January likely disrupted closings and dampened home-buying activity.
• Low Inventory: A persistent lack of available homes for sale continues to constrain the market in some regions.

Expert Insights and Market Outlook

Despite mortgage rates 'nearing 6%,' which has made an additional 5.5 million households eligible for a mortgage compared to a year ago, this has not yet translated into a significant surge in buying activity. Dr. Yun emphasized the critical need to increase housing supply, stating, 'Unless housing supply increases, these additional potential buyers becoming active in the market could simply push up home prices.' He also mentioned the recent passage of the 'Housing for the 21st Century Act' by the House of Representatives as a step towards addressing the nation's housing shortage.

Redfin Senior Economist Asad Khan observed that with more homes for sale than buyers, those in the market possess negotiating power, which is helping to keep price growth in check. The median U.S. home sale price increased by 1.1% year-over-year in January, reaching $422,921. However, the month also saw nearly 40,000 home purchases canceled, representing 13.7% of homes under contract, the highest January share since 2017. Analysts suggest that while January's figures were soft, activity is expected to pick up as the spring market approaches.