Affordability is better. But homebuyers are still not saving their contracts
Pending home sales fell month-over-month and year-over-year in January, despite improving market factors. However, several economists urged agents to remain calm, saying a sales boost is likely to come this spring.
House price increases are slowing, inventories are increasing and mortgage interest rates are lower than last year. That should be enough to get homebuyers off the sidelines, right?
Wrong.
Awaiting house sales, which reflect the signing of contracts for homes that have not yet closedfell by 0.8 percent month-on-month and by 0.4 percent year-on-year in January. On a regional basis, monthly home sales increased in the Midwest and West, and decreased in the Northeast and South. Meanwhile, annual pending home sales rose in the South and West and fell in the Northeast and Midwest.
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National Association of Realtors chief economist Lawrence Yun said stronger market tailwinds are not drawing homebuyers to the coast.
Lawrence Yun | Chief Economist at the National Association of Realtors
“Improving affordability conditions has yet to lead to increased purchasing activity,” he said in a written statement on Thursday. “With mortgage rates near 6 percent, an additional 5.5 million households that could not qualify for a mortgage a year ago would qualify for a mortgage at today’s lower rates. Most newly eligible households will not take immediate action, but based on past experience, approximately 10 percent could enter the market, potentially adding roughly 550,000 new homebuyers this year compared to last year.”
While January’s upcoming sales forecast weak existing sales in February, senior U.S. economist Sam Williamson says the metro-level numbers offer more than a few positives.
“It’s also worth treating the January data with caution. Seasonal slowdowns and winter weather can disrupt both contract activity and closings, and existing home sales also showed a significant decline in January,” Williamson said in an emailed statement. “The softer pace also gives supply more time to catch up ahead of the busy spring homebuying season: single-family home inventory increased 4.7 percent from December, and monthly supply increased from 3.8 months to 4.2 months on a seasonally adjusted basis.”
Sam Williamson, senior economist, First American
“More homes on the market should give buyers more options and keep price pressures in check as activity increases,” he added. “Several major metro areas also stood out with stronger annual gains – Phoenix, Boston and Charlotte, each up about 11 percent, along with San Francisco and Oklahoma City – signs that buyer interest is beginning to reemerge as conditions improve.”
Bright MLS chief economist Lisa Sturtevant said homebuying activity will likely improve this spring as homebuyers will — hopefully — lean on their market power.
Dr. Lisa Sturtevant | Clear MLS
“It is likely that we will see more homebuying activity in the coming months as inventory improves,” she emailed Inman. “Spring is typically the busiest market, when homes sell fastest and offers come in at or above list price. But this year, buyers will have more leverage than they have had in recent years.
“Sellers will have to get their home ready to move in and pay the right price if they want a quick sale.”
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