After four months of rises, the pending home sales index fell by 5.5% for the month of December, experiencing month-over-month losses in transactions in all four major U.S. regions to cap a year that was marked by volatility.
The most significant month-over-month decline was in the West. The same pattern held true on a yearly basis, as all four regions saw year-over-year declines, led by the Midwest.
The Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—registered at 74.2 to end the year. Year-over-year, pending transactions fell by 5%. Last year’s cyclical low point occurred in July, when the index reached a nadir of 70.2. An index of 100 equals the level of contract activity in 2001.
A home sale is listed as pending when a contract has been signed but a deal has not closed, with the sale usually finalized within one to two months of signing. The index is based on a sample that covers roughly 40% of multiple listing service data for every month.
Last year saw volatility for the PHSI, with a 4.9% drop in January, followed by two months of increases until another 7.7% decline in April, and then a series of up-and-down swings until the low point in July before rising consistently through November.
“After four straight months of gains in contract signings, one step back is not welcome news, but it is not entirely surprising,” said National Association of REALTORS® Chief Economist Lawrence Yun. “Economic data never moves in a straight line. High mortgage rates have not significantly dented housing demand due to greater numbers of cash transactions.”
Bright MLS Chief Economist Lisa Sturtevant echoed Yun’s sentiments, pointing out in a statement that the dip in pending home sales runs contrary to a potential winter thaw that many had predicted for the housing market.
“Overall, home sales fell to a near-30-year low in 2024. Pending sales activity had been higher in October and November, and there was some growing optimism that the 2025 housing market could start out strong. However, with mortgage rates rising in December and pushing above 7% in January, buyers and sellers are hesitant.”
Regional breakdown
The Northeast PHSI dipped by 8.1% month-over-month to 62.3, a 1.3% decline year-over-year. The Midwest index experienced a 4.9% month-over-month decline to 74.3, a 6.9% decrease year-over-year.
The PHSI for the Southern region of the U.S. decreased by 2.7% month-over-month to 90.6 in December, a 5.1% decline year-over-year. The West saw a sharp drop of 10.3% month-over-month to 57.7, a 5.1% decline year-over-year.
“The South saw the biggest pick up in for-sale housing inventory in December, and boasts a high share of affordable inventory, helping prevent bigger declines in pending home sales,” said Realtor.com® Senior Economic Research Analyst Hannah Jones in a statement. “The Northeast and Midwest have seen slower inventory growth as demand remains relatively sustained in the region.”
Yun also commented on the regional PHSI declines, offering that price points and rates have kept the Northeast and West out of reach for many potential buyers.
“Contract activity fell more sharply in the high-priced regions of the Northeast and West, where elevated mortgage rates have appreciably cut affordability,” said Yun. “Job gains tend to have greater impact in more affordable regions. It is unclear if heavier-than-usual winter precipitation impacted the timing of purchases.”
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