Kicking the year off with some optimism, pending home sales in December increased 8.3%, according to the National Association of Realtors (NAR). The Midwest, South, and West posted both monthly and year-over year gains in transactions, while the Northeast recorded monthly and year-over-year losses.
“The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices,” says Lawrence Yun, NAR chief economist. “Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand.”
The Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—increased to 77.3 in December, while pending transactions were up 1.3% year over year. An index of 100 is equal to the level of contract activity in 2001.
Regionally, the Northeast PHSI dropped 3% from last month to 62.3, a decline of 3.9% from December 2022. The Midwest index climbed 5.6% to 80.5 in December, up 4.3% from one year ago.
The South PHSI increased 11.9% to 93.0 in December, rising 1.5% from the prior year. The West index spiked 14.0% in December to 61.0, up 1.5% from December 2022.
In its Economic Outlook as of January, NAR projects a 13% yaer-over-year increase in existing-home sales in 2024 to 4.62 million and a 15.8% year-over-year increase in 2025 to 5.35 million. The annual median home price is expected to rise 1.4% to $395,100 in 2024 and then increase 2.6% to $405,200 in 2025.
“Home sales are projected to rise significantly in each of the next two years as the market steadily returns to normal sales activity,” adds Yun.
NAR forecasts the Federal Reserve will likely cut interest rates four times and the 30-year fixed mortgage rate will bounce between the 6% to 7% range for most of the year.
