Suburban homes under cloudy skies

Pending home sales slid nearly 5% in January 

While pending sales reversed course last month, experts blamed seasonality and less favorable borrowing rates for the lack of activity from buyers.

February 29, 2024
2 minutes

Key points:

  • Pending home sales fell 4.9% in January after improving in December from record lows in the autumn months.
  • The Northeast and West logged fractional increases in pending home sales, but in both the Midwest and South, sales dipped more than 7%.
  • Cold weather and a lack of “favorable movement on mortgage rates” may have slowed sales activity.

National pending home sales reversed in January after rising in December from record lows in prior months. According to NAR, January saw seasonally adjusted pending home sales slip by 4.9% from the previous month.

But the latest numbers aren't a cause for alarm, NAR Chief Economist Lawrence Yun said, particularly as the economy continues to remain resilient. 

"The job market is solid, and the country's total wealth reached a record high due to stock market and home price gains," Yun said. "This combination of economic conditions is favorable for home buying. However, consumers are showing extra sensitivity to changes in mortgage rates in the current cycle, and that's impacting home sales."

The Northeast and West regions posted slight gains in pending home sales — up 0.8% and 0.5%, respectively — but the Midwest and South were each down more than 7% in January. When comparing pending sales to the same period a year ago, the Midwest has seen a drop of 11.6%, the biggest decline among all regions. 

All four U.S. regions are still posting year-over-year drops in pending home sales. 

While inventory has remained tight in high-demand markets, Yun said job growth across the South and Rocky Mountain states is helping keep pending home sales afloat in those regions. 

"As a result, long-term housing demand is increasing more significantly in these regions. However, the timing and number of purchases will largely depend on the prevailing mortgage rates and inventory availability," he added.

And it was the Midwest's notoriously extreme winter weather and frigid cold temperatures that caused a dip in those states, suggested Dr. Lisa Sturtevant, Bright MLS chief economist.

"Some buyers might have been avoiding the snow and cold weather in January, while holding out hope for lower rates later this winter and spring," she said. "Buyers who were out home shopping at the beginning of the year did not see much favorable movement on mortgage rates."

But those hoping for mortgage rate relief may have to wait a bit longer, CoreLogic's Dr. Selma Hepp predicts. 

"It's quite possible that the Fed may not change its strategy on interest rates until late this year, so potential home buyers may need to contend with high mortgage rates for the remainder of the year."

Mortgage rates have now increased for a fourth straight week, with average rates approaching 7% this week according to Freddie Mac.

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