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Pending Home Sales Increased by 2.5 % December , Ending Six-Month Slide
“ The new normal for mortgage rates will likely be in the 5.5 % to 6.5 % range ,” Yun added . “ Job gains will steadily become important in driving local home-sales markets . The South , in particular , is set to outperform the rest of the country , thanks primarily to better job market conditions in this part of the country compared to other regions .”
The National Association of Realtors ® is America ’ s largest trade association , representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries . The term Realtor ® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of Realtors ® and subscribes to its strict Code of Ethics .
WASHINGTON ( January 27 , 2023 ) – Pending home sales increased in December for the first time since May 2022 — following six consecutive months of declines — according to the National Association of Realtors ®. The Northeast and Midwest recorded month-over-month reductions , while the South and West posted monthly gains . All four U . S . regions saw year-over-year decreases in transactions , with the West experiencing the largest decline at 37.5 %.
The Pending Home Sales Index ( PHSI )* — a forwardlooking indicator of home sales based on contract signings — improved 2.5 % to 76.9 in December . Year-over-year , pending transactions dropped by 33.8 %. An index of 100 is equal to the level of contract activity in 2001 .
“ This recent low point in home sales activity is likely over ,” said NAR Chief Economist Lawrence Yun . “ Mortgage rates are the dominant factor driving home sales , and recent declines in rates are clearly helping to stabilize the market .”
Pending Home Sales Regional Breakdown
The Northeast PHSI dropped 6.5 % from last month to 64.7 , a decrease of 32.5 % from December 2021 . The Midwest index shrank 0.3 % to 77.6 in December , a decline of 30.1 % from one year ago .
The South PHSI rose 6.1 % to 94.1 in December , dropping 34.5 % from the prior year . The West index advanced 6.4 % in December to 58.6 , decreasing 37.5 % from December 2021 .
* The Pending Home Sales Index is a leading indicator for the housing sector , based on pending sales of existing homes . A sale is listed as pending when the contract has been signed but the transaction has not closed , though the sale usually is finalized within one or two months of signing .
Pending contracts are good early indicators of upcoming sales closings . However , the amount of time between pending contracts and completed sales is not identical for all home sales . Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing , home inspection problems , or appraisal issues .
The index is based on a sample that covers about 40 % of multiple listing service data each month . In developing the model for the index , it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months .
An index of 100 is equal to the average level of contract activity during 2001 , which was the first year to be examined . By coincidence , the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million , which is considered normal for the current U . S . population .
NOTE : Existing-Home Sales for January will be reported on February 21 . The next Pending Home Sales Index will be on February 27 . All release times are 10 a . m . Eastern . View the NAR Statistical News Release Schedule .