Contracts to purchase previously owned homes unexpectedly fell in December by the most in a year, a sign the industrys recovery remains uneven.
The index of pending sales dropped 3.7% after a 0.6% gain the prior month that was smaller than initially estimated, figures from the National Association of Realtors showed Thursday in Washington. The median forecast of 42 economists surveyed by Bloomberg called a 0.5% increase.
Fewer available properties, higher prices and still-tight credit are hurdles for some customers as first-time buyers remain reluctant to enter the market. At the same time, employment gains and near record-low mortgage rates will help to underpin demand, one reason builders such as Lennar Corp. expect the industry’s rebound will be sustained.
“Total inventory fell in December for the first time in 16 months, resulting in fewer choices for buyers and a modest uptick in price growth,” Lawrence Yun, the NAR’s chief economist, said in a statement. “More jobs, increasing consumer confidence, less expensive mortgage insurance and new low-down-payment programs coming into the marketplace will likely lead to more demand from first-time buyers.”
Estimates in the Bloomberg survey ranged from a drop of 4.4% to an increase of 1.6%. The Realtors’ group revised the November data from a previously reported gain of 0.8%.
All four regions saw a decrease, led by a 7.5% drop in the Northeast, the report showed. Pending sales declined 4.6% in the West, 2.8% in the Midwest and 2.6% in the South.
Compared with a year earlier, the index increased 8.5% on an unadjusted basis after a 1.5% gain in the prior 12-month period. They were projected to climb 10.5%, according to the Bloomberg survey median.
The pending sales gauge was 100.7 on a seasonally adjusted basis, the lowest since April. A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic, according to the NAR.
Economists consider pending sales a leading indicator because they track contract signings. Purchases of existing homes are tabulated when a deal closes, typically a month or two later.
Those resales, which make up more than 90% of the housing market, rose less than anticipated in December as prices accelerated and inventory shrank, according to figures from the Realtors group. A Commerce Department report showed new-home sales jumped last month to the highest level since June 2008.