Contracts to buy previously owned homes rebounded last month as buyers adjusted to the recent jump in mortgage rates, according to figures released Monday from the National Association of Realtors in Washington.
The pending home sales gauge rose 1.6% from previous month (the forecast was for a 1% gain) after falling 2.5% the prior month. The index dropped 2% from December 2015 on an unadjusted basis. Pending sales increased in two of four U.S. regions from November.
The increase in contract signings follows a post-election jump in borrowing costs that pushed down pending sales in November. While steady growth in jobs, wages and the economy will continue to underpin home purchases, the supply of available properties is at historic lows, limiting any potential gains in the market. With the Federal Reserve projecting three interest-rate increases this year, further increases in mortgage costs could put houses out of reach for some buyers.
“The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs,” Lawrence Yun, NAR’s chief economist, said in a statement. “Sales will struggle to build on last year’s strong pace if inventory conditions don’t improve.”
Signings rose 2.4% in the South, the biggest increase since April, while the 5% jump in the West was a three-month high. The index fell 1.6% in the Northeast and 0.8% in the Midwest. NAR projects existing-home sales to rise 1.7% in 2017, with the median price up 4%. December’s seasonally adjusted pending-sales gauge rose 0.3% from a year earlier.