A bar chart shaped like houses getting taller.
Illustration by Lanette Behiry/Real Estate News

Pending home sales see healthy bump after record lows 

The uptick in pending homes is a “promising” sign of life in a market that has been sidelined by low inventory and high home prices.

January 26, 2024
2 minutes

Key points:

  • Seasonally adjusted pending home sales increased 8.3% in December.
  • This increase comes after pending home sales fell to a record low in October as mortgage rates reached their 2023 peak.
  • NAR believes the trend will continue, with sales rising “significantly in each of the next two years.”

Pending home sales were up significantly last month after hitting a record low in October and remaining flat in November.

According to the National Association of Realtors, seasonally adjusted pending home sales increased 8.3% in December — a notable bump during a period marked by low inventory and even lower home sales. 

The latest report showed double-digit gains in the West, where pending home sales jumped 14% from the previous month, and the South, which saw a 12% rise. In the Midwest, pending sales increased 5.6% from the previous month, while the Northeast saw a decline of 3%.

Compared to the same period a year ago, national pending home sales are up by just 1.3%. However, NAR is forecasting an uptick in existing-home sales this year. During a December panel, NAR Chief Economist Lawrence Yun predicted that existing-home sales will increase 13% in 2024 — if mortgage rates behave as expected. 

"Home sales are projected to rise significantly in each of the next two years as the market steadily returns to normal sales activity," Yun said in the pending homes report. That optimism is due in part to anticipated rate cuts by the Fed, a decrease in mortgage interest rates, and continued delivery of new homes and rentals, according to NAR researchers.

The delivery of new inventory has been crucial for buyers, said Hannah Jones, senior economic research analyst for Realtor.com.

"Many buyers, faced with limited existing home inventory, have pivoted to new construction options, which have grown to 31.2% of total inventory," she noted. "Though for-sale inventory remains scarce, new listing activity picked up 9.1% nationally in December, which pushed overall for-sale inventory 4.9% higher than a year prior."

And the uptick in pending home sales in December is "promising" in the challenged market, she added, saying that the latest "activity emphasizes the impact of a small win in affordability, namely lower mortgage rates."

Market conditions will continue to be a hurdle to homeownership for many buyers, however.

"Reading between the numbers on pending home sales shows that many American consumers emerged from the pandemic with strong credit scores and remain in a good position to buy a home," CoreLogic Chief Economist Dr. Selma Hepp said. "However, they are also aware that market fundamentals make it somewhat of a challenge to purchase."

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