December 2022 ended the year with an increase in pending home sales. This was the first increase seen in the housing market since May. Those in the industry believe that the mortgage rates were what enticed the buyers.
The pending sales index also went up 2.5% from November to December. The pending sales index is determined by signed contracts to buy a home which is different from existing home sales. The pending sales index is released by the National Association of Realtors (NAR). This is good news, but it is still down 33.8% from the same time in 2021.
“This recent low point in home sales activity is likely over,” said Lawrence Yun, NAR chief economist. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”
The Northeast was down 6.5% from November and the Midwest was down 0.3%. All other regions saw an increase with the West being the highest at 6.4%.
“The new normal for mortgage rates will likely be in the 5.5% to 6.5% range,” Yun predicted. “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.”
Buyers are out there and are actively searching for a home. “Mortgage applications have been trending higher alongside lower rates, pending home sales are up, and builder confidence increased in January,” Kushi said. “Interested buyers are out there. From a financial perspective, the decision to buy a home comes down to a payment-to-paycheck calculation, and lower rates may help to reduce the mortgage payment while higher incomes can increase one’s monthly paycheck.”
There is still the challenge of affordability. “Though mortgage rates fell as low as 6.27% in December, down 0.8 percentage points from November’s high, home prices remained elevated, up 8.4% compared to the previous year,” she said.