Pending home sales edged up in December, 0.5 percent in the National Association of REALTORS® (NAR) Pending Home Sales Index (PHSI). The PHSI posted 110.1 in December, up from 109.6 in November. The Index is based on contract signings.
Two of the four major regions in the U.S. saw increases in the PHSI in December, with the South up 2.6 percent to 126.9 and the West up 1.5 percent to 101.7. The Northeast and Midwest saw decreases, down 5.1 percent to 93.9 and 0.3 percent to 105.0, respectively.
“Another month of modest increases in contract activity is evidence that the housing market has a small trace of momentum at the start of 2018,” says Lawrence Yun, chief economist at NAR. “Jobs are plentiful, wages are finally climbing and the prospect of higher mortgage rates [is] perhaps encouraging more aspiring buyers to begin their search now.”
Yun cautions, however, that these improvements might not raise sales this year.
“Sadly, these positive indicators may not lead to a stronger sales pace,” Yun says. “Buyers throughout the country continue to be hamstrung by record low supply levels that are pushing up prices, especially at the lower end of the market.”
Additionally, sales could be slowed by the Tax Cuts and Jobs Act, according to Yun.
“In the short term, the larger paychecks most households will see from the tax cuts may give prospective buyers the ability to save for a larger down payment this year, and the healthy labor economy and job market will continue to boost demand,” says Yun. “However, there’s no doubt the nation’s most expensive markets with high property taxes are going to be adversely impacted by the tax law. Just how severe is still uncertain, but with homeownership now less incentivized in the tax code, sellers in the upper end of the market may have to adjust their price expectations if they want to trade down or move to less expensive areas. This could in turn lead to both a decrease in sales and home values.”
Realtor.com® Senior Economist Joseph Kirchner said the following about the pending home sales numbers, which “foreshadow a very competitive spring buying season:”
“[The] 0.5 percent increase in December pending home sales shows just how far buyers are willing to go to close on their dream home. Holiday plans and winter weather usually result in a December real estate slowdown, but not this time. Unsuccessful summer buyers have stayed in the market well into winter months. [This] increase is setting us up for strong existing winter home sales and foreshadows a very competitive spring buying season.”
MORE: Housing and Tax Reform: Where Could the Impact Land?
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