Pending home sales (contracts signed) slid 2.5 percent in January, according to the National Association of Realtors (NAR).
Although the index is 1.4 higher than January 2015, and last month hit a nearly 10-year high, and has increased year-over-year for 17 consecutive months, all regions but the South saw a decline in contract activity in January.
Why did this happen?
“While January’s blizzard possibly caused some of the pullback in the Northeast, the recent acceleration in home prices and minimal inventory throughout the country appears to be the primary obstacle holding back would-be buyers,” said Dr. Lawrence Yun, NAR Chief Economist.
Adding to the mix, he notes that “some buyers could be waiting for a hike in listings come springtime.”
Regional performance varied
In the Northeast, pending home sales fell 3.2 percent in January, remaining 10.9 percent above a year ago.
The index dropped 4.9 percent in the Midwest for the month, and is still 1.4 percent above January 2015.
The West saw a 4.5 percent drop, but a 0.4 percent increase for the year.
Contrasting the other regions, in the South, sales actually rose 0.3 percent, but are 1.3 percent lower than last January.
NAR forecasts the index to rise 2.5 percent this year, median prices to increase 4.0 to 5.0 percent, compared to 2015’s rose of 6.3 and 6.8 percent, respectively.
Why the cooled forecast? In a statement, NAR indicates that as home prices rise, more homeowners may be enticed to sell, but Dr. Yun remains focused on affordability and supply conditions, which he says won’t improve until builders ramp up production, particularly at lower price points.
“First-time buyers in high demand areas continue to encounter instances where their offer is trumped by cash buyers and investors,” adds Yun. “Without a much-needed boost in new and existing-homes for sale in their price range, their path to homeownership will remain an uphill climb.”