US Pending Home Sales Unexpectedly Drop To Lowest In A Year

Home shoppers in January faced numerous obstacles as they sought to buy a home.

Buyers are easily outnumbering sellers in several metro areas, NAR chief economist Lawrence Yun said in a statement.

"Sales got off to a fantastic start in January, but last month's retreat in contract signings indicates that activity will likely be choppy in coming months as buyers compete for the meager number of listings in their price range", Yun says. Existing home sales were running at annual rate of 5.69 million in January, the strongest pace in almost a decade.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, dipped 2.8% to 106.4 in January, down from December's upwardly revised 109.5. As households grow more confident in their personal finances and job growth continues throughout the country, home sales increase across the country, Yun explained.

On a regional basis, the PHSI in the Northeast rose 2.3 percent to 98.7 in January, and is now 3.6 percent above a year ago, while the index in the South was a scant 0.4 percent higher at 122.5 percent and is two percent higher on year-over-year basis.

NAR uses a large national sample of signed residential property sale contracts to build its monthly pending home sales index.

But the price of a typical home jumped by more than double the pace of wage gains in January from a year earlier, and mortgage rates have risen in the past six months.

Existing home sales are projected to hit 5.57 million for the year, an increase of 2.2% from 2016, while the national median existing-home price is expected to increase 4%. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

The sharp decline in sales for the West will reinforce concerns over affordability issues as the West registered the highest rates of price increases during 2016. The biggest drop was in the West where sales plunged 9.8 percent for the month and were 0.4 percent lower compared to a year ago.

  • Zachary Reyes