As 2021 ended, pending home sales tallied another month of declines in December, according to recent data from the National Association of REALTORS® (NAR).
NAR’s Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, dropped by 3.8% in December, sliding to 117.7. All regions saw year-over-year contract signings decline as well, dipping 6.9% nationally.
While 2021 was a banner year for the housing market, experts indicated that buyer activity contracted in December as many house hunters were left with slim pickings at the tail end of 2021. Rising rates coupled with surging price tags for homes hasn’t helped the matter either.
Existing-home sales are expected to decline by 2.8% in 2022, while home prices are expected to climb by 5.1% due to the ongoing housing shortage, even as builders ramp up production.
Regional breakdown:
Northeast
-1.2% MoM — Now 98.2 PHSI
-10.5% YoY
Midwest
-3.7% MoM — 112.8 PHSI
-1.2% YoY
South
-1.8% MoM — 145.2 PHSI
-3.9% YoY
West
-10.0% MoM — 95.0 PHSI
-16.2% YoY
What the industry is saying:
“Pending home sales faded toward the end of 2021, as a diminished housing supply offered consumers very few options. Mortgage rates have climbed steadily over the last several weeks, which unfortunately will ultimately push aside marginal buyers.
“The market will likely endure a minor reduction in sales as mortgage rates continue to edge higher. The combination of a more measured demand and rising supply will bring housing prices better in line with wage growth,” — Lawrence Yun, NAR Chief Economist
“Contract signings declined again in December, with a 3.8% monthly drop, as buyers faced an all-time lowest inventory of unsold homes. Pending home sales were 6.9% below year-ago levels, with both monthly and yearly declines registering across all geographic regions. While the index declined in seven of the 12 months of 2021, the yearly value was above the prior two years, pointing to increased overall housing activity, also mirrored in the higher pace of sales.
“At the close of 2021, U.S. housing activity remained unseasonably competitive, as buyers bid for a smaller number of homes for sale. December’s inventory level was 26.8% below that of the prior year, which totaled 177,000 fewer for-sale properties. In addition, with winter holidays and colder weather encouraging people to take a break from the market, many homeowners postponed plans to list, leading to further declines in new inventory and pushing listing prices 10% higher than in December 2020.
“These trends are continuing in January 2022, with realtor.com®’s latest weekly housing data spotlighting continued competitiveness despite a sharp rise in mortgage rates. Homes hitting the market are selling ten days faster than a year ago before being snapped up by buyers, who are likely concerned about even higher interest rates in the months ahead. At this pace, I expect the spring buying season to start well before trees begin to sprout new buds.” — George Ratiu, Manager of Economic Research, realtor.com®
For more information, please visit www.nar.realtor.
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to jgrice@rismedia.com.
