Gauge of U.S. pending home sales declines to a six-month low

A gauge of U.S. pending home sales fell to a six-month low in January as buyers competed for a limited number of properties.

The National Association of Realtors’ index of pending home sales decreased 2.8% from the prior month to 122.8, according to data released Thursday. December data was revised to a 0.5% gain after a previously reported decline. The median estimate in a Bloomberg survey of economists called for no change in January.

The decline is the latest sign that the housing boom may be starting to cool amid soaring prices, a lack of inventory and rising mortgage rates. The residential real estate market has been a bright spot in the economy as it recovers from the pandemic. Contract signings are still up 8.2% from a year ago on an unadjusted basis.

“There are simply not enough homes to match the demand on the market” Lawrence Yun, chief economist at the NAR, said in a statement. Still, Yun said he expects inventory to rise in the coming months.

The lack of inventory thus far has driven prices upwards, putting homeownership out of reach for some, said Joel Kan, the Mortgage Bankers Association’s associate vice president of economic and industry forecasting.

“Various other data sources have pointed to higher median sales prices and record-high purchase mortgage loan sizes, all of which have started to create affordability challenges in many parts of the country,” he said. “While home building has picked up to attempt to meet the high demand, increased listings of existing homes will be needed in the coming months to alleviate this shortage of housing inventory.”

By region, contract signings fell in the West, Northeast and Midwest. In the South, the index for pending home sales rose to the highest since August.


Pending Home Sales Post 5th Straight Loss

January marked the fifth straight
month that the National Association of Realtors® (NAR) has reported a decline
in its Pending Home Sales Index (PHSI). The index, based on newly signed
contracts for the purchase of existing homes, was down 2.8 percent from its
December level.

The index in January was at
122.8 compared to 125.5 in December and has lost 10 points since August. Still,
pending sales were up 13 percent compared to a year earlier. This January’s
PHSI was, in fact, the highest for any January on record.  

Analysts had expected the index to be
flat but individual estimates by those polled by Econoday all overshot the
actual results. They covered a range from a 1.5 percent downturn to 0.5 percent
growth. The consensus was for zero change.

“Pending home sales fell in January
because there are simply not enough homes to match the demand on the market,”
said Lawrence Yun, NAR’s chief economist. “That said, there has been an
increase in permits and requests to build new homes.” Yun said that increase in
single-family permits has been consistent for eight months and is a good sign
that the supply and demand imbalance in the residential real estate market
could be easing 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,” he said. “These trends, along with an anticipated
ramp-up in home construction will provide for much-needed supply.”

Following a week where January’s
existing-home sales increased, Yun noted that pending contracts are a great
early indicator for upcoming closed sales but stressed that the timing of the
relationship between existing-home sales and pending home sales may not be in

“The two measurements aren’t always
perfectly correlated due to varying amounts of time required to close a
contract,” Yun said. “This is because a number of fallouts can occur due to a
variety of factors, including a buyer not obtaining mortgage financing, a
problem with a home inspection, or an appraisal issue.”

He noted that the economy is showing
promising signs of improvement, and many millions of Americans are now receiving
a COVID-19 vaccination. Still, he cautioned that the better economic outlook,
rising inflation prospects and higher budget deficits will soon drive increases
in interest rates. “I don’t foresee mortgage rates jumping to an alarming
level,” he said, “but we should prepare for a rise of at least a decimal point
or two.”

Pending Home Sales Fall in January as Inventory Constrains Buyers>

The numbers: The index of pending home sales fell 2.8% in January after four consecutive months of declines, the National Association of Realtors said Thursday. The index captures real-estate transactions where a contract was signed but the sale has not yet closed, making it an indicator of where existing-home sales will go in the months ahead.

The median forecast of economists polled by MarketWatch had called for a 0.5% decline in pending sales on a monthly basis.

“Pending home sales fell in January because there are simply not enough homes to match the demand on the market,” Lawrence Yun, the chief economist for the National Association of Realtors, said in the report. “That said, there has been an increase in permits and requests to build new homes.”

Compared to 2019, pending sales were up 13%, indicating that the housing market remains strong despite the weakness that has crept in during the winter months.

What happened: Pending sales didn’t fall across all regions, as contract signings increased slightly in the South. The largest decline in pending sales occurred in the West, where the index dropped 7.8%, closely followed by the Northeast (-7.4%).

The big picture: A record-low inventory of homes is leaving buyers with few options to choose from, and builders have even begun selling a vast array of properties that haven’t been built yet to meet this demand.

But there’s evidence that demand could begin to suffer as affordability concerns grow. “The timely weekly mortgage purchase applications index is signaling a slowing in activity,” said Rubeela Farooqi, the chief U.S. economist at High Frequency Economics, while citing mortgage application data from the Mortgage Bankers Association. The latest reading signified the lowest level for mortgage applications since mid-May of last year, Farooqi noted.

Some of the decline in the volume of mortgage applications was a reflection of the disruption in Texas caused by recent winter storms. But generally speaking, rising mortgage rates are reducing interest from home buyers to an extent. With prices also quickly rising, buying a home is becoming less and less affordable, which could hinder home sales in the months to come.

What they’re saying: “Home buyers are staying surprisingly active during the colder months. However, buyer demand is getting squeezed by a scarcity of ‘For Sale’ signs and rising mortgage rates,” said senior economist George Ratiu.


U.S. existing-home sales unexpectedly rise to three-month high

Sales of previously owned U.S. homes unexpectedly rose to a three-month high in January as Americans sought to take advantage of ultra-low mortgage rates that have powered the boom in housing.

Contract closings increased 0.6% from the prior month to an annualized 6.69 million, after a downwardly revised 6.65 million in December, according to National Association of Realtors data released Friday. The median forecast in a Bloomberg survey of economists called for a 6.6 million rate in January.

Low borrowing costs paired with a desire for single-family homes with more space during the pandemic has propelled demand, even as other parts of the economy lag. Sales of existing homes last year were the strongest since 2006. Still, prices are rising, inventory is limited and expectations of higher mortgage rates may weigh on buyer demand going forward.

“We have to get more inventory,” Lawrence Yun, NAR’s chief economist, said on a call with reporters. “Sales could be even higher,” if more homes were put on the market, he said.

Single-family homes with rooftop solar panels and backyard pools are seen in this aerial photograph taken over a Lennar Corp. development in San Diego, California.

Bing Guan/Bloomberg

While low mortgage rates have helped make buying a home more affordable, prices are soaring. The median selling price increased 14.1% from a year earlier to $303,900 in January, a record for the month.

Properties remained on the market for 21 days in January, compared with 43 days in the same month last year.

There were a record-low 1.04 million homes for sale last month, down 25.7% from a year earlier. At the current pace, it would take 1.9 months to sell all the homes on the market, down from 3.1 months in January of last year. Realtors see anything below five months of supply as a sign of a tight market.

Recent data also suggest the housing market will remain a bright spot for months to come. While home-construction declined in January for the first time in five months, permits to build single-family houses rose at the fastest pace since 2006. The number of one-family dwellings authorized but not yet started increased to the highest in more than 13 years.


Existing Home Sales Rise, But Inventories Hamper Results

Existing home sales started the 2021 with a small increase
from the December sale levels, the second consecutive monthly gain. The
National Association of Realtors® (NAR) said transactions that include pre-owned
single-family homes, townhomes, condominiums, and co-ops, increased 0.6 percent
in January to a seasonally adjusted annual rate of 6.69 million units compared
to 6.76 million in December. The month’s results are up 23.7 percent from the
annual rate
of 5.41 million sales in January 2020.

Existing home sales have increased in seven of the last
eight months, even though pending sales, generally considered a leading
indicator for the following one or two existing sales reports, have posted four
straight monthly losses.

Analysts surveyed by Econoday had expected a slight
pull-back in January’s sales. Their consensus was for annualized sales of 6.60
million units.

Sales of single-family homes were at a seasonally adjusted
annual rate of 5.93 million, a 0.2 percent gain from 5.92 million the previous
month and a 23.0 percent year-over-year increase. Condominium and co-op sales rose
4.1 percent from December to a rate of 760,000 units, 28.8 percent annual

Home sales continue to ascend in
the first month of the year
, as buyers quickly snatched up virtually every new
listing coming on the market,” said Lawrence Yun, NAR’s chief economist. “Sales
easily could have been even 20 percent higher if there had been more inventory
and more choices.”

The median existing-home price for
all housing types in January was $303,900, up 14.1 percent from a year ago when
the median was $266,300. It was the 107th straight month of annual gains.  The median existing single-family home price
was $308,300, 14.8 percent annual growth, and condos appreciated by 8.6 percent
to a median of $269,600.

Whereas much of the economy has
suffered due to COVID-19, the housing sector has been one of the few bright
, according to Yun. “Home sales are continuing to play a part in propping
up the economy,” he said. “With additional stimulus likely to pass and several
vaccines now available, the housing outlook looks solid for this year.”

Yun says he expects more jobs to
return, which will spur homebuying in the coming months and predicts
existing-home sales will reach at least 6.5 million in 2021. This will be despite
an increase in mortgage interest rates due to the rising budget deficit and
higher inflation.

25.7 percent from the 1.40 million listings in January 2020. The unsold
inventory is estimated to be a 1.9-month supply at the current sales pace,
unchanged from December, but down from the 3.1-month supply a year earlier. Properties
typically remained on the market for 21 days, seasonally even with December,
but down from an estimated 43 days in January 2020. Seventy-one percent
of the homes sold in January 2021 were on the market for less than a month.

First-time buyers accounted
for one-third of January sales and individual
investors or second-home buyers purchased 15 percent of the homes sold during
the month. Nineteen percent of sales were all-cash.
Fewer than 1 percent of sales were distressed, that is foreclosure or short

Sales results for January were mixed
across the four major regions
, but all posted double-digit increases in both annual
sales and appreciation. Existing-home sales fell 2.2 percent in the Northeast
to an annual rate of 870,000 units, 24.3 more than a year ago. The median price
rose 15.8 percent to $361,400.

The Midwest saw sales inch up 1.9
percent to an annual rate of 1,570,000 in January, a 22.7 percent jump from a
year prior. The median price grew 14.7 percent to $227,800.

The month-over-month increase in
sales in the South was 3.2 percent to an annual rate of 2,940,000, up 25.1
percent on an annual basis. The median price increased 14.6 percent to $263,300.

Existing-home sales in the West fell
4.4 percent from December but increased 21.3 percent from a year earlier to a rate
of 1,310,000 units. The median price was $461,800, up 16.1 percent from January


U.S. Existing Home Sales Rise in January as Buyers ‘Snatch Up’ Any New Listings

The numbers: U.S. existing home sales inched up 0.6% to a seasonally-adjusted annual rate of 6.69 million, the National Association of Realtors said Friday. Compared with a year ago, home sales were up 23.7%.

Economists polled by The Wall Street Journal had forecast that existing home sales would fall to a median rate of 6.66 million.

What happened: The median existing-home price rose to $303,900 in January, up 14.1% from a year ago.

The inventory of homes for sale fell to a record low 1.04 million units by the end of January. That’s a 25.7% decline year-over-year. The market had a 1.9-month supply of homes for sales. A 6-month supply is considered a sign of a balanced market.

The South and the Midwest showed an increase in sales in January.

Big picture: Sales have been moving sideways since setting a cycle high in October. Economists think that low mortgage rates will continue to boost housing demand in coming months. Buyers are also looking for more room and more remote locations in the wake of the pandemic.

What the NAR said: “Home sales continue to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market. Sales easily could have been even 20% higher if there had been more inventory and more choices,” said said Lawrence Yun, NAR’s chief economist.

What economists are saying? “In general, record low mortgage rates and families fleeing more crowded living situations are fueling demand for single family homes in spite of ongoing turmoil in the labor market and higher home prices. Indeed, this is one sector which is coming out of the crisis stronger than it went into it,” said Josh Shapiro, chief U.S. economist at MFR Inc.

Market reaction: U.S. stocks opened higher Friday with the S&P 500 index up 12.48 points in mid-day trading after declining in the past three trading sessions.


Pending Home Sales Fall on the Month, but the Midwest Is Hit the Hardest

The numbers: The index of pending home sales dropped 0.3% in December, marking the fourth consecutive month of declines, the National Association of Realtors said Friday. The index measures real-estate transactions in which a contract is signed, but the sale had not yet closed.

Compared to 2019, pending sales were still up 21%, a sign of how strong the market is right now despite the recent weakness.

What happened: Pending sales didn’t fall across all regions, as was the case in November.

In fact, the Midwest was the only region to experience a decline, with a 3.6% drop. Pending sales were flat in the West and rose by 3.1% in the Northeast and 0.1% in the South.

The big picture: In the months to come, the story will be whether the number of listings of homes for sale will grow to meet demand.

“Pending home-sales contracts have dipped during recent months, but I would attribute that to having too few homes for sale,” said Lawrence Yun, the National Association of Realtors’ chief economist. “There is a high demand for housing and a great number of would-be buyers, and therefore sales should rise with more new listings.”

It’s not clear precisely what has held sellers back from putting their homes on the market. But the problem could be a self-perpetuating one: Some buyers might be seeing the dearth of homes for sale and be reluctant to list their own for fear of not finding somewhere to move to.

What they’re saying: “Demand for existing homes remains strong but supply is likely restraining sales figures,” said Ruben Gonzalez, chief economist at Keller Williams. “We expect to see continued price acceleration in the near term as a result of record-low inventory levels that have persisted for several months now.”

Market reaction: The Dow Jones Industrial Average and S&P 500 both fell in Friday morning trades.


25% of U.S. homeowners haven’t moved in 20 years

Around 25% of American homeowners have lived in their homes for 20 years or more, and the trend could be contributing to the shortage in housing inventory, experts say.

Redfin said its latest study shows there are now more U.S. homeowners with a 20+ year tenure of living in their homes than ever before, and that this is being accelerated by the trend of aging in place. Moreover, the average homeowner has now lived in their home for 13 years, up from just 8.7 years a decade ago, Redfin’s study found.

With Americans staying in their homes for much longer than before, this has contributed to a logjam in available housing inventory. Redfin noted National Association of Realtors’ data from last week that shows inventory across the U.S. fell 23% in December compared to the same month one year ago to an all-time low of just 1.9 month’s supply at the current sales pace.

“It will take vigorous new-home construction in 2021 and in 2022 to adequately furnish the market to properly meet the demand,” NAR Chief Economist Lawrence Yun said in a statement last week.

As well as the stay in place trend, experts say that the COVID-19 pandemic has also sidelined may would-be home sellers as they’re scared of getting infected by allowing people to tour their homes. In addition, potential sellers are worried that if they do sell up, they won’t be able to find a new home very easily. The tight inventory across the U.S. is pushing up home prices. A median existing home now costs $309,800, up almost 13% compared to one year ago, the NAR’s data shows.

Redfin’s chief economist Daryl Fairweather told the Wall Street Journal that housing was in the middle of a “really huge” supply crunch. “It becomes a cycle where people don’t want to move because it’s so difficult to buy a home, and then that, in turn, makes it even more difficult to buy a home because people aren’t moving and freeing up inventory,” he said.