Pending home sales slid for the third consecutive month in January, according to data released by the National Association of Realtors on Friday.
After dropping 3.8% in December, the Pending Home Sales Index (PHSI) fell another 5.7% in January to 109.5. This value is 9.5% lower than a year ago, however the value is higher than those recorded in January 2019 and January 2020.
An index of 100 is equal to the level of contract activity in 2001.
“With inventory at an all-time low, buyers are still having a difficult time finding a home,” Lawrence Yun, NAR’s chief economist, said in a statement.
Odeta Kushi, the deputy chief economist at First American, echoed this sentiment in a statement: “Housing supply in January hit an all-time low. Inventory turnover – the supply of homes for sale nationwide as a percentage of occupied residential inventory fell to 1.11%. That means that only 111 in every 10,000 homes were for sale – a historic low.”
Both Kushi and Yun believe that these factors are also to blame for the drop in demand, but despite the pullback, they feel demand remains strong.
In the release, the NAR state that it expects economic conditions to remain volatile in the coming months as the Federal Reserve asset purchase program concludes in March, opening the door for higher interest rates and as the Russia-Ukraine conflict continues to escalate, potentially impacting the global oil supply.
“There’s also the possibility that investors may flee toward safer U.S. Treasury bonds, which may result in temporary short-term relief to interest rates,” Yun said in a statement.
The NAR’s hottest housing markets data for January showed that out of the 40 largest metropolitan areas, Orlando-Kissimmee-Sanford, Fla.; Tampa-St. Petersburg, Fla.; Jacksonville, Fla.; Nashville-Davidson-Murfreesboro-Franklin, Tenn.; and Las Vegas-Henderson-Paradise, Nev., were the most improved over the past year.
Regionally, contract signings fell year over year across all regions, with the West seeing the only month-over-month increase (1.5%), this came after the region recorded a 10.0% monthly decline in December. In the Northeast the PHSI was 84.3 in January, a 12.1% month-over-month decrease and a 16.7% decline from a year ago. In the Midwest, it dropped 5.9% month over month to 104.4, a 5.9% drop from January 2021. Pending home sales transactions in the South dropped 6.3% from the month prior to an index value of 134.6, representing an 8.7% yearly decline.