After reaching a record high in August, pending home sales slid for the fourth consecutive month, as surging home prices and low inventory started to impede the housing market.
The Pending Home Sales Index (PHSI), reported by the National Association of Realtors (NAR), is a forward-looking indicator based on signed contracts. The PHSI fell 0.3% from 125.9 in November to 125.5 in December, the highest level for December. However, on a year-over-year basis, sales were still 21.4% higher than a year ago.
Regionally, Midwest was the only region to experience a decline in December, with a 3.6% drop. PHSI in the Northeast and South rose 3.1% and 0.1%, while sales in the West remained flat. On a year-over-year basis, all four regions saw double-digit year-over-year growths, ranging from 13.9% in the Midwest to 26.6% in the South.
Despite the declines in recent months, pending home sales still outperformed this year and housing demand remained strong due to low mortgage rates. However, rising home prices driven by record-low inventory may hurt affordability, especially first-time buyers. More listings and home construction are needed to meet this rising demand.
This post brought to you by NAHB Eye on Housing.