(Kitco News) - Hopes for a stabilizing U.S. housing market were dealt a severe blow after the number of potential home buyers fell beyond expectations last month, according to the latest data from the National Association of Realtors (NAR).
The U.S. pending home sales index declined -5.5% in December, the NAR announced on Thursday, after November’s revised 1.9% increase, which was originally reported at 2.2%. The data was significantly worse than forecasts, as economists expected a flat 0.0% reading. All four U.S. regions experienced month-over-month declines in transactions, with the most significant fall in the West.
For the year, pending home sales declined -5.0% against expectations for a 4.0% increase, and following the unrevised 6.9% rise in November. All four regions also posted losses year-over-year, with the Midwest seeing the largest decrease.
“After four straight months of gains in contract signings, one step back is not welcome news, but it is not entirely surprising,” said NAR Chief Economist Lawrence Yun. “Economic data never moves in a straight line. High mortgage rates have not significantly dented housing demand due to greater numbers of cash transactions.”
Spot gold rose further in the minutes following the housing data, after rallying following the disappointing Q4 GDP data earlier. It last traded at $2,789.64 per ounce for a gain of 1.07% on the day.
“Contract activity fell more sharply in the high-priced regions of the Northeast and West, where elevated mortgage rates have appreciably cut affordability,” Yun added. “Job gains tend to have greater impact in more affordable regions. It is unclear if heavier-than-usual winter precipitation impacted the timing of purchases.”
Economists pay close attention to pending home sales because the report is a leading indicator of existing home sales given that contracts are signed a few months before homes are actually sold.
The U.S. housing market has been trying to stabilize after seeing significant weakness through most of 2023 and early 2024. Many potential home buyers have been priced out of the market due to rising prices and higher mortgage rates.
