Pending Home Sales See First Increase Since May
January 27, 2023
Pending home sales increased in December for the first time in more than six months, a sign that falling mortgage rates are bringing buyers back into the housing market.
The National Association of Realtors (NAR) pending sales index, which tracks signed contracts to buy homes rather than closed sales, increased by 2.5% in December from the month prior.
That is the first monthly increase since May. However, even with the slight uptick, the index was down 33.8% from a year earlier.
The NAR’s chief economist argues that the “recent low point in home sales activity is likely over,” attributing the recent upturn and more optimistic outlook to falling mortgage rates, which have been one of the driving factors in the market’s cooldown.
To many prospective buyers’ relief, mortgage rates have been trending down since November. This week, the average interest rate for a 30-year fixed-rate mortgage sat at 6.13%, the lowest level since September. However, even with the recent retreat, current rates are much higher than had been. The same week in 2022, the average 30-year rate was at just 3.55%.
Lower rates mean increased affordability, which has remained historically low, even as the surging pace of home price increases has slowed in recent months. The national median mortgage payment decreased last month to $1,920, down 2.9% from $1,977 in November, according to the Mortgage Bankers Association.
However, even with the recent downturn in mortgage rates, rates remain much higher than during the post-pandemic housing boom, which means that affordability remains an issue, particularly for entry-level buyers. At today’s rates, the monthly mortgage payment for a median-priced home in December was $730 higher than a year prior.