WASHINGTON, DC--(Marketwired - Jan 30, 2014) - Pending home sales measurably dropped in December, with abnormal weather partly inhibiting home shopping in much of the U.S., according to the National Association of Realtors®. Declines were experienced in all four major regions.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, fell 8.7 percent to 92.4 in December from a downwardly revised 101.2 in November, and is 8.8 percent below December 2012 when it was 101.3. The data reflect contracts but not closings, and are at the lowest level since October 2011, when the index was 92.2.
Lawrence Yun, NAR chief economist, said several factors are working against buyers. "Unusually disruptive weather across large stretches of the country in December forced people indoors and prevented some buyers from looking at homes or making offers," he said. "Home prices rising faster than income is also giving pause to some potential buyers, while at the same time a lack of inventory means insufficient choice. Although it could take several months for us to get a clearer read on market momentum, job growth and pent-up demand are positive factors."
The PHSI in the Northeast dropped 10.3 percent to 74.1 in December, and is 5.5 percent below a year ago. In the Midwest the index declined 6.8 percent to 93.6 in December, and is 6.9 percent lower than December 2012. Pending home sales in the South fell 8.8 percent to an index of 104.9 in December, and are 6.9 percent below a year ago. The index in the West, which is most impacted by constrained inventory, dropped 9.8 percent in December to 85.7, and is 16.0 percent below December 2012.
Total existing-home sales this year should hold close to 5.1 million, essentially the same as 2013, but inventory remains limited in much of the country. The national median existing-home is projected to rise about 5.4 percent in 2014.
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. For additional commentary and consumer information, visit www.houselogic.com and http://retradio.com.
*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
NOTE: Existing-home sales for January will be reported February 21, the next Pending Home Sales Index will be February 28, and fourth quarter metropolitan area home prices will be published February 11; release times are 10:00 a.m. EST.
Information about NAR is available at www.realtor.org. This and other news releases are posted in the "News, Blogs and Videos" tab on the website. Statistical data in this release, as well as other tables and surveys, are posted in the "Research and Statistics" tab.