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Upward Momentum: Pending Home Sales Show 8.3% Growth in December

In December, pending home sales experienced an 8.3% surge, as reported by the National Association of REALTORS®. Transaction gains were evident in the Midwest, South, and West regions, while the Northeast recorded a decline. Year-over-year comparisons showed increases in the Midwest, South, and West, whereas the Northeast witnessed a decrease in transactions compared to the previous year.

The Pending Home Sales Index (PHSI), a forward-looking gauge of home sales based on contract signings, reached 77.3 in December. Pending transactions showed a 1.3% increase year over year. It’s worth noting that an index of 100 corresponds to the contract activity level in 2001.

“The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices,” said 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.”

NAR Quarterly U.S. Economic Forecast

NAR also released its Economic Outlook as of January 2024, projecting a 13% increase in existing-home sales in 2024 (from 2023) to 4.62 million and a 15.8% increase in 2025 (from 2024) 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,” added Yun.

The Federal Reserve will likely cut interest rates four times. The 30-year fixed mortgage rate will bounce along the 6% to 7% range for most of the year.

NAR forecasts that due to sizable growth in apartment construction over the past three years, rent growth will calm, which will help bring consumer price inflation to less than 3% in 2024.

Pending Home Sales Regional Breakdown

The Northeast PHSI dropped 3.0% from last month to 62.3, a decline of 3.9% from December 2022. The Midwest index increased 5.6% to 80.5 in December, up 4.3% from one year ago.

The South PHSI jumped 11.9% to 93.0 in December, rising 1.5% from the prior year. The West index surged 14.0% in December to 61.0, up 1.5% from December 2022.