“Diminished housing supply offered consumers very few options,” says NAR’s chief economist. He predicts a 2.8% sales decline by the end of 2022.
WASHINGTON – Pending home sales fell in December for two straight months of declines, according to the National Association of Realtors®’ (NAR) monthly report. All four major U.S. regions that make up the full report posted month-over-month and year-over-year drops in contract activity.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – fell 3.8% to 117.7 in December. Year-over-year, transactions decreased 6.9%. An index of 100 is equal to the level of contract activity in 2001.
“Pending home sales faded toward the end of 2021, as a diminished housing supply offered consumers very few options,” says Lawrence Yun, NAR’s chief economist. “Mortgage rates have climbed steadily the last several weeks, which unfortunately will ultimately push aside marginal buyers.”
Even with December’s slowdown in transactions, Yun says 2021 was an overall great period for housing in terms of sales and price appreciation.
Yun’s forecast calls for the 30-year fixed mortgage rate to jump to 3.9% by the fourth quarter, and existing-home sales will dip by 2.8% to 5.95 million units.
December marks the third straight month of increased new-home construction, and Yun expects housing inventory to keep improving and contribute to slower home price growth in 2022. He forecasts housing starts to rise to 1.65 million units and home prices to increase 5.1%.
“The combination of a more measured demand and rising supply will bring housing prices better in line with wage growth,” Yun says.
December pending home sales regional breakdown: Month-over-month, the Northeast PHSI fell 1.2% to 98.2 in December, a 10.5% decline from a year ago. In the Midwest, the index dropped 3.7% to 112.8 last month, down 1.2% from December 2020.
Pending home sales transactions in the South slid 1.8% to an index of 145.2 in December, down 3.9% from December 2020. The index in the West decreased 10.0% in December to 95.0, down 16.2% from a year prior.
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