Pending home sales continued to slide for the third straight month in January 2022, according to the National Association of REALTORS® latest Pending Home Sales Index (PHSI). Only the West saw an increase in month-over-month contract activity among the four national regions. All four regions suffered a year-over-year decline.
Key findings:
- Contract signings fell by 5.7% in January to an index score of 109.5.
- Year-over-year transactions decreased by 9.5%.
- In the Northeast, the PHSI, a leading economic indicator, fell by 12.1% last month, down to 84.3 on the index. That’s a 16.7 YoY decrease.
- The Midwest index fell 5.9% to 104.4 last month, down 5.9% from January 2021.
- The South declined 6.3% to an index of 134.6 in January, down 8.7% from the same period in 2021.
- The West increased 1.5% in January to 95.2, but is down 9.7% versus January 2021.
The takeaway:
“With inventory at an all-time low, buyers are still having a difficult time finding a home,” said Lawrence Yun, NAR’s chief economist.
“Given the situation in the market – mortgages, home costs and inventory – it would not be surprising to see a retreat in housing demand,” Yun said.
In a statement, NAR said it expects volatile economic conditions in the coming months. “The impending conclusion of the Federal Reserve’s asset purchase program in March paves the way for higher interest rates. Russia’s aggression in Ukraine is also likely to affect global oil supply, imposing further burdens on inflation and bringing about more aggressive rate hikes,” its report reads.
“There’s also the possibility that investors may flee toward safer U.S. Treasury bonds, which may result in temporary short-term relief to interest rates,” Yun added.
“Contract signings declined for a third consecutive month in January, slipping 5.7% from the prior month, as the housing market began 2022 with demand outpacing an all-time low number of unsold homes, said Danielle Hale, chief economist at realtor.com®. Compared to last year, January’s inventory level was down 28.4%, and seller participation was lagging until this week, a factor in pending home sales being down 9.5% in the same period. Despite the slip in contract activity, rising competition in real estate markets–particularly in relatively affordable hot markets in states like California and North Carolina –suggests that home shoppers are out in earnest, propelling home price growth and short time on the market.
We are expecting continued home sales growth in 2022 as a large cohort of young households grows into prime first-time homebuying ages. That generational tailwind will mean strong demand for housing despite a myriad of shifting conditions, from faster-rising rates and inflation to emerging geopolitical tensions. Much like the onset of COVID, these events are a reminder that we live in a world that is both big and small. What happens on the other side of the globe can impact the U.S. economy and housing markets. While some effects, such as potentially lower interest rates and higher oil prices can be expected, others like the lingering supply chain issues that first manifested during the pandemic could lead to unanticipated disruptions ahead, particularly if geopolitical tensions are prolonged.”
For more information, visit https://www.nar.realtor/.
