WASHINGTON – Pending home sales dropped slightly in December but still registered as the highest ever recorded for the month, according to the National Board of Realtors.
The decline marked the fourth straight month of month-over-month decreases, the organization said in a news release.
“While contract transactions fell in one of the four major U.S. regions, activity climbed or remained flat in the three other areas,” the organization said. “Compared to a year ago, all four regions witnessed double-digit gains in pending home sales transactions.”
The Pending Home Sales Index, an indicator of home sales based on contract signings, dropped 0.3% to 125.5 in December, the organization said. Year over year, contract signings went up by 21.4%. An index of 100 is equal to the level of contract activity in 2001.
“Pending home sales contacts have dipped during recent months, but I would attribute that to having too few homes for sale,” said NAR’s chief economist, Lawrence Yun. “There is a high demand for housing and a great number of would-be buyers, and therefore sales should rise with more new listings.”
The higher demand without a significant increase in supply caused home prices to rise. Yun predicted that prices could continue to rise in the near future.
Yun also said he expected strong economic growth in 2021, bolstered by low mortgage rates and efforts to stimulate the economy. He said those factors would drive up the number of home sales.
If rates stay low, Yun said, existing-home sales are likely to reach 6.49 million – a 15% increase from 5.64 million last year.
“There will also be slower home price appreciation, likely 6.6%, as increased confidence from home builders will ultimately lead to an increase in housing starts,” he said.
The Northeast Pending Home Sales Index rose 3.1% to 112.0 in December, up 22.1% from a year ago, according to the news release. In the Midwest, the index dropped 3.6% to 111.7 in December, an increase of 13.9% from the previous year.
Pending home sales in the South rose 0.1% to an index of 150.6 in December, up 26.6% from a year ago. And in the West, the index remained unchanged at 111.3, up 18.9% from a year ago.