With housing inventory at an all-time low, contract signings decreased 5.7% month over month in January—the third consecutive month for a drop, the National Association of REALTORS® reported Friday. NAR’s Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, is down 9.5% compared to a year earlier. All four major regions of the U.S. posted annual declines in activity. “Buyers are still having a difficult time finding a home,” says NAR Chief Economist Lawrence Yun.
Yun says home buyers also are contending with escalating home prices and rising mortgage rates, which have increased by more than a full percentage point over the last six months, according to Freddie Mac. “Given the situation in the market—mortgages, home costs, and inventory—it would not be surprising to see a retreat in housing demand,” Yun says.
NAR predicts economic conditions could be volatile in the coming months as the Federal Reserve ends its asset purchase program in March, which could drive up interest rates. Also, Russia’s conflict with Ukraine likely will lead to a crisis in global oil supply and further accelerate inflation, NAR notes. That said, “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 says.
