For the fourth consecutive month in November, pending home sales saw an upward trend, as reported by the National Association of Realtors (NAR).
Despite mortgage rates remaining high throughout much of 2024, confidence among homebuyers is rising as they prepare for the new year.
Market Trends and Performance
The NAR’s latest findings, shared on Monday, revealed that pending home sales increased by 2.2% from October to November and showed a substantial year-over-year growth of 6.9%.
The Pending Home Sales Index (PHSI), which forecasts future sales based on signed contracts, reached a value of 79.0 in November—its highest since February 2023.
This figure surpassed the October value of 77.4, which already represented a 5.4% growth over the previous year.
Using the year 2001 as a baseline (set at 100), this index indicates that home sales are gradually approaching more normalized levels, even as mortgage rates edge closer to the 7% mark.
NAR’s deputy chief economist pointed out that, while affordability continues to be a challenge, the increasing availability of homes for sale has motivated buyers to make their move.
Most notably, the South, West, and Midwest saw an uptick in pending home sales, in contrast to a slight decline in the Northeast.
Regional Performance
According to HousingWire’s Mortgage Rates Center, current conforming loan rates for both 15-year and 30-year mortgages hover just above 7%.
Among the regions, the South exhibited the strongest performance, with its PHSI climbing to 94.5 in November—a 5.2% rise compared to the month before and an impressive 8.5% increase from the previous year.
The West followed with a modest month-over-month increase of 0.5% and an annual gain of 11%, resulting in a PHSI of 64.3.
Meanwhile, the Midwest saw a slight uptick of 0.4% month-over-month and a 1.6% increase from a year ago, netting a PHSI of 78.1.
Only the Northeast faced a slight downturn, dropping by 1.3% from October, though it still boasted a 5.6% increase year-over-year, with a PHSI of 67.8.
Kushi emphasized that the surge in housing supply has been particularly notable in the Southern and Western markets, while improvements in the Northeast and Midwest remain limited.
She highlighted that an increased supply could enhance affordability, potentially enticing more buyers into the market and spurring renewed activity as the new year unfolds.
Future Predictions
Industry experts believe that rising pending home sales reflect a shift in buyer sentiment regarding mortgage rates.
Many appear ready to enter the housing market despite the current high rates, a trend facilitated by the increased inventory available.
The chief economist for NAR pointed out that consumers have adjusted their expectations around mortgage rates, seizing opportunities created by the uptick in available homes.
Given that rates have consistently remained above 6% for the past two years, buyers seem less inclined to wait for a significant drop.
Looking ahead, Lisa Sturtevant, chief economist at Bright MLS, predicts a surge in sales activity in early 2025.
She acknowledges that while some potential buyers may feel disheartened by high rates and limited inventory, the burgeoning market demand is likely to manifest in the first quarter of 2025 as rates stabilize and inventory expands.
However, she also cautions that economic volatility could pose risks, particularly in relation to inflation and labor market stability.
Persistent inflation or a downturn in the labor market could dampen expectations for a robust housing market recovery in 2025.
Recent data from NAR illustrates an increase in housing activity in November and December, marking a 6.1% annualized rise in existing home sales—the most significant year-over-year growth since June 2021.
New home sales also showed promise in November, reflecting an annualized increase of 8.7%, according to the U.S. Census Bureau.
Despite a Federal Reserve rate cut on December 18, some analysts remain skeptical that mortgage rates will see significant declines in early 2025.
NAR continues to forecast that mortgage rates will stabilize around 6%, anticipating existing home sales to reach approximately 4.5 million in 2025.
Source: Housingwire