U.S. Pending-Home Sales Rebound Despite Rise in Mortgage Rates

Contracts to buy previously owned U.S. homes rebounded last month as buyers adjusted to the recent jump in mortgage rates, according to figures released Monday from the National Association of Realtors in Washington.

Key Points

  • Pending home-sales gauge rises 1.6 percent from previous month (forecast was for 1 percent gain) after falling 2.5 percent the prior month
  • Index dropped 2 percent from December 2015 on an unadjusted basis
  • Pending sales increased in two of four U.S. regions from November

Big Picture

The increase in contract signings follows a post-election jump in borrowing costs that pushed down pending sales in November. While steady growth in jobs, wages and the economy will continue to underpin home purchases, the supply of available properties is at historic lows, limiting any potential gains in the market. With the Federal Reserve projecting three interest-rate increases this year, further increases in mortgage costs could put houses out of reach for some buyers.

Economist Takeaways

“The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs,” Lawrence Yun, NAR’s chief economist, said in a statement. “Sales will struggle to build on last year’s strong pace if inventory conditions don’t improve.”

Other Details

  • Signings rose 2.4 percent in the South, the biggest increase since April, while the 5 percent jump in the West was a three-month high; index fell 1.6 percent in the Northeast and 0.8 percent in the Midwest
  • NAR projects existing-home sales to rise 1.7 percent in 2017, with median price up 4 percent
  • December’s seasonally adjusted pending-sales gauge rose 0.3 percent from a year earlier