Pending-Home Sales Rebound Despite Rise in Mortgage Rates
Contracts to buy previously owned U.S. homes rebounded last month as buyers adjusted to the recent jump in mortgage rates, according to figures released Jan. 30 from the National Association of Realtors in Washington.
Key Points
• Pending home-sales gauge rises 1.6% from previous month (forecast was for 1% gain) after falling 2.5% the prior month.
• Index dropped 2% from December 2015 on an unadjusted basis.
• Pending sales increased in two of four U.S. regions from November.
Big Picture
The increase in contract signings follows a post-election jump in borrowing costs that pushed down pending sales in November. While steady growth in jobs, wages and the economy will continue to underpin home purchases, the supply of available properties is at historic lows, limiting any potential gains in the market. With the Federal Reserve projecting three interest-rate increases this year, further increases in mortgage costs could put houses out of reach for some buyers.
Economist Takeaways
“The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs,” Lawrence Yun, NAR’s chief economist, said in a statement. “Sales will struggle to build on last year’s strong pace if inventory conditions don’t improve.”
Other Details
• Signings rose 2.4% in the South, the biggest increase since April, while the 5% jump in the West was a three-month high; index fell 1.6% in the Northeast and 0.8% in the Midwest.
• NAR projects existing-home sales to rise 1.7% in 2017, with median price up 4%.
• December’s seasonally adjusted pending-sales gauge rose 0.3% from a year earlier.
