Pending home sales in the United States experienced a notable surge in December as mortgage rates fell, attracting buyers back into the market. According to the monthly index released by the National Association of Realtors (NAR), pending home sales rose by 8.3% compared to the previous month. This indicator of the direction of existing-home sales in the coming months surpassed expectations on Wall Street, as economists had anticipated only a 2% increase.
The December increase marks the largest jump since June 2020, when pending-home sales rose by 14.9%. Compared to the same period last year, transactions were up by 1.3%.
Looking ahead, the NAR has released an updated forecast for existing-home sales, projecting a 13% increase in 2024 compared to the previous year. They anticipate a sales pace of 4.62 million, attributing this growth to a series of expected interest rate cuts by the U.S. Federal Reserve throughout the year, causing the 30-year mortgage rate to hover between 6% and 7%.
Despite these positive indicators, the housing market’s recovery is still restricted by a lack of supply. The industry is reliant on more homeowners deciding to sell their homes and the fading of the so-called “lock-in effect” to significantly boost sales.
Lawrence Yun, the chief economist at the NAR, expressed optimism about the housing market’s performance in 2024, noting that falling mortgage rates and stable home prices have created a favorable environment for buyers. He emphasized that job additions and income growth will further contribute to housing affordability, but increased supply remains essential to meet potential demand.
In response to this news, stocks DJIA SPX showed early gains in Friday’s trading. Additionally, the yield on the 10-year Treasury note BX:TMUBMUSD10Y increased above 4.1%.