Pending home sales snap streak of declines

The National Association of Realtors says the “low point in home sales activity” is likely over.
A snapshot of the December 2022 PHSI from the National Association of Realtors.

Following six straight months of declines, pending home sales saw an increase in December 2022.

The latest Pending Home Sales Index (PHSI), released this morning by the National Association of Realtors (NAR), saw a 2.5% increase to 76.9 in December. 

The PHSI is a forward-looking indicator of home sales based on contract signings.

But on a year-over-year basis, pending transactions fell 33.8% with sale remaining well below normal levels. An index of 100 is equal to the level of contract activity in 2001.

“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.”

Here’s how pending home sales break down by region:

  • The Northeast PHSI dropped 6.5% from last month to 64.7, a decrease of 32.5% from December 2021. 
  • The Midwest index shrank 0.3% to 77.6 in December, a decline of 30.1% from one year ago.
  • The South PHSI rose 6.1% to 94.1 in December, dropping 34.5% from the prior year. 
  • The West index advanced 6.4% in December to 58.6, decreasing 37.5% from December 2021.
Lawrence Yun wearing a suit and tie
NAR Chief Economist Lawrence Yun.

“The new normal for mortgage rates will likely be in the 5.5% to 6.5% range,” Yun added. “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 compared to other regions.”

The NAR represents more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. 

Earlier this month, the NAR reported that existing-home sales decreased for the 11th consecutive month in December. 

Existing-home sales in December 2022 fell 1.5% from November to a seasonally adjusted annual rate of 4.02 million. Year-over-year, sales dropped 34% and are down from 6.09 million in December 2021.

Single-family home sales declined to a seasonally adjusted annual rate of 3.60 million in December, down 1.1% from 3.64 million in November and 33.5% from the previous year. The median existing single-family home price was $372,700 in December, up 2.0% from December 2021.