Pending home sales rose for the first time since May, breaking a six-month streak of declines, according to the National Association of Realtors.
The Pending Home Sales Index increased by 2.5% between November and December. Year-over-year it dropped by 33.8%, an improvement over November’s 37%.
All four regions saw pending sales fall YOY, but the South and West saw gains month-over-month.
“This recent low point in home sales activity is likely over,” said NAR Chief Economist Lawrence Yun. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”
Mortgage rates fell again last week to 6.13%, drawing some buyers back to the market.
Purchase loan applications increased again as well.
“Mortgage rates continue to tick down and, as a result, home purchase demand is thawing from the months-long freeze that gripped the housing market,” said Sam Khater, Freddie Mac’s chief economist.
Nadia Evangelou, senior economist and director of forecasting for NAR, suggested that rates may dip further after the FOMC’s February meeting, where Fed officials are expected to raise rates by a much smaller degree.
Redfin Economics Research Lead Chen Zhao noted that high rates turned many buyers out of the market in 2022, but volatility kept them away.
“When rates were seesawing up and down in the fall, many buyers dropped out because they could wake up the day after finding their dream home to a three-digit increase in their potential monthly payment. Now they have a better sense of how far their budget will go in which neighborhoods and which homes they can afford,” Zhao said.
As rates continue to slip steadily and positive economic indicators increase hope for a mild recession, potential homebuyers are also feeling more confident.
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