Wow. Pending home sales skyrocketed to start 2023, according to the latest data from the National Association of Realtors.
- M-O-M: The Pending Home Sales Index jumped 8.1% to 82.5 in January, this is up from the 2.5% increase in December and is now at the highest level since August.
- Y-O-Y: Despite the big jump, pending transactions year-over-year dropped by 24.1%
Swing & A Miss. Economists predicted a much smaller increase of just 1.0%.
Go West, Young Man. The West reported the biggest month-over-month jump with a 10.1% increase from December to an index of 66.2, this was, however, down 29.3% from the same time last year.
- The South is on the cusp of an index of 100 after an 8.3% increase to 99.2. An index of 100 is equal to the level of contract activity in 2001. The south was down 24.7% year-over-year.
- The Midwest was up 7.9% to an index of 83.3 and the Northeast was up 6.0% to an index of 68.7. Both regions were also down year-over-year with the Midwest and the Northeast falling 19.8% and 21.1%, respectively.
All About Rates. Lawrence Yun, NAR Chief Economist, said affordability was a big reason for the jump in demand and that this Q1 is the likely bottom for housing activity. “Buyers responded to better affordability from falling mortgage rates in December and January… Home sales activity looks to be bottoming out in the first quarter of this year, before incremental improvements will occur..”
Crystal Ball. NAR predicts that median existing-home prices will be stable compared to the previous year for most markets — with the national median home price decreasing by 1.6% in 2023, to $380,100, before regaining positive traction of 3.1% in 2024, to $391,800.
- Yun Notes that prices should remain stable going forward, “…home prices will be steady in most parts of the country with a minor change in the national median home price.”
BOTTOM LINE: Rates fell in January and, as Yun said, this increased affordability which increased the pool of potential buyers. Unfortunately, rates skyrocketed in February, meaning that the pool of buyers has shrunk again and sales are likely to hit a brick wall this month.