Pending home sales continued a three-month streak of declines in January, the National Association of Realtors (NAR) reported.
NAR’s Pending Home Sales Index (PHSI) found contract signings fell 5.7% to 109.5 in January, down 9.5% year-over-year (YOY).
Only the West saw any increases, with contract signings rising 1.5% from December to January, but down 9.7% from a year earlier.
The Northeast saw the largest annual drop in contract signings, 16.7%, plus a 12.1% drop in the month-to-month numbers, down to 84.3. The Midwest saw a 5.9% drop both monthly and annually, while signings in the South fell 6.3% from December and 8.7% YOY.
“With inventory at an all-time low, buyers are still having a difficult time finding a home,” said Lawrence Yun, NAR’s chief economist.
“Given the situation in the market – mortgages, home costs, and inventory – it would not be surprising to see a retreat in housing demand,” Yun said.
Mortgage applications recently dropped to their lowest level since December 2019 as rates inch closer to 4%, but demand remains high. Bidding wars hit their highest level since at least April 2020, with 70% of home offers from Redfin agents facing competition in January.
“Rising mortgage rates are intensifying an already-severe shortage of homes for sale because buyers are feeling more urgency to buy while homeowners are feeling less urgency to sell—an imbalance that’s fueling an increase in competition,” said Redfin Chief Economist Daryl Fairweather.
“Buyers are battling it out for the few homes on the market in an effort to lock in relatively low payments before rates move even higher, but homeowners who bought or refinanced in the last year are staying put because they don’t want to lose their rock-bottom mortgage rate.”
The report notes that economic conditions are likely to remain “volatile” due to incoming tightening by the Federal Reserve and Russia’s invasion of Ukraine.
“There’s also the possibility that investors may flee toward safer U.S. Treasury bonds, which may result in temporary short-term relief to interest rates,” Yun added.