Pending home sales fell by 2.8% from December to January, according to the National Association of Realtors’ latest Pending Home Sales index, owing to inventory constraints and their effect on prospective sales. At the regional level, only the South posted a small pending home sales gain month over month, while the other regions saw decreases over the same period.
“Pending home sales fell in January because there are simply not enough homes to match the demand on the market,” says Lawrence Yun, NAR’s chief economist. “That said, there has been an increase in permits and requests to build new homes.”
On a year-over-year basis, pending home sales are 13% higher than one year ago, and all regions show sales gains. The Pending Home Sales Index itself rose to 122.8, hitting an all-time record for the month of January.
The NAR reports a consistent rise in housing permits for single-family homes for the last eight months. Yun believes that the supply and demand imbalance for homes could ease as soon as mid-2021. “There will also be a natural seasonal upswing in inventory in spring and summer after few new listings during the winter months,” Yun says. “These trends, along with an anticipated ramp-up in home construction, will provide for much-needed supply.”
According to Yun, the economy is showing signs of improvement, particularly as the vaccine rollout continues. However, he cautions that rising inflationary expectations and budget deficits may lead interest rates higher again. “I don’t foresee mortgage rates jumping to an alarming level, but we should prepare for a rise of at least a decimal point or two,” he says.
