Pending Home Sales Improve for Second Straight Month

Even as market strengthened this year, pending transactions dropped 24.1% from year earlier.

By

Published February 27, 2023

Realtor showing mother and daughter a home for sale. — Getty Images

Pending U.S. home sales rose for a second straight month in January, jumping 8.1% as affordability improved, according to the National Association of Realtors.

Key Takeaways

Pending home sales improved for a second straight month, rising 8.1% in January.
Pending transactions are still down nearly 24.1% year-over-year, despite improvements in the market.
Contract signings were up across all four U.S. regions in January.

The Pending Home Sales Index, NAR’s indicator of future home sales based on contract signings, rose to 82.5 in January. Pending transactions dropped 24.1% from the same month a year earlier as higher mortgage rates raised the cost of buying. By January, rates had begun to ease, though they remained well above January 2022.

“Buyers responded to better affordability from falling mortgage rates in December and January,” said NAR Chief Economist Lawrence Yun.

New home sales also rose in January, increasing 7.2% from the previous month, thanks to lower rates and increased willingness from home builders to provide buying incentives. Although sales increased and totaled 670,000 throughout January, they were still down 19.4% compared to a year ago.

Sales of existing, previously occupied homes slumped in January, falling to their lowest level since October 2010. Many homeowners are reluctant to sell, knowing they'll have to borrow at higher rates than their existing mortgage to buy another house.

The NAR expects the slump in existing home sales to continue, dropping 11.1% over 2023, before increasing into 2024. The group expects the national median home price for existing homes to decrease by 1.6% throughout the year, leveling out to an average of $380,000, before rising again into 2024.

The group also predicts newly built home sales to slump slightly this year, with sales expected to fall 3.7% year-over-year, before jumping up to 19.4% in 2024. Prices for newly built homes are expected to increase 1.3%, to $461,000.

As the economy adds more jobs and inflation slowing, the NAR predicts that 30-year fixed mortgage rates will fall steadily in 2023 to 6.1% and to 5.4% in 2024.

Contract signings increased in all four U.S. regions, the NAR said, while pending home sales dropped in all regions compared with a year ago.

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National Association of Realtors, "Pending Home Sales Improved for Second Straight Month, Up 8.1% in January."

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