As 2014 came to an end, mortgage rates reached their lowest level of the year, but lower borrowing costs did little to boost pending home sales as inventories were tight and prices remained on the high side, according to the National Association of Realtors.
The Realtors’ Pending Home Sales Index, which is based on contract signings, decreased 3.7 percent to 100.7 in December, from a slightly downwardly revised 104.6 in November.
But it is 6.1 percent above December 2013 (94.9). Despite last month’s decline (the largest since December 2013 at 5.8 percent), the index experienced its highest year-over-year gain since June 2013 (11.7 percent).
Lawrence Yun, NAR chief economist, said fewer homes available for sale and a slight acceleration in prices likely led to December’s decline in contract signings.
“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 in markets throughout the country,” he said. “With interest rates at lows not seen since early 2013, the strength in existing-sales in upcoming months will largely depend on the willingness of current homeowners to realize their equity gains from the past couple years and trade up.”
Yun pointed to positive developments in the U.S. economy in the months aehad. “More jobs, increasing consumer confidence, less expensive mortgage insurance and new low down payment programs (through the Federal Housing Administration) coming into the marketplace will likely lead to more demand from first-time buyers,” he said.
The PHSI in the Northeast saw the largest decline, dropping 7.5 percent to 82.1 in December, but is still 6.3 percent above a year ago. In the Midwest the index decreased 2.8 percent to 97.1in December, but is 1.9 percent above December 2013.
Pending home sales in the South declined 2.6 percent to an index of 116.6 in December, but are 8.6 percent above last December. The index in the West fell 4.6 percent in December to 94.0, but is 6.3 percent above a year ago.
Total existing-homes sales in 2015 are forecast to be around 5.26 million, an increase of 6.6 percent compared to 2014. The national median existing-home price for all of this year is expected to increase between 4 and 5 percent.
In 2014, existing-home sales declined 3.1 percent and prices rose 5.8 percent.