U.S. Pending Home Sales Unexpectedly See Further Downside In January

(RTTNews) - Pending home sales in the U.S. unexpectedly saw further downside in the month of January, according to a report released by the National Association of Realtors on Thursday.

NAR said its pending home sales index slid by 0.8 percent to 70.9 in January after plunging by 7.4 percent to a revised 71.5 in December.

Economists had expected pending home sales to jump by 2.5 percent compared to the 9.3 percent nosedive originally reported for the previous month.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

"Improving affordability conditions have yet to induce more buying activity," said NAR Chief Economist Dr. Lawrence Yun. "With mortgage rates nearing 6%, an additional 5.5 million households that could not qualify for a mortgage one year ago would qualify at today's lower rates."

He added, "Most newly qualifying households do not act immediately, but based on past experience, about 10% could enter the market—potentially adding roughly 550,000 new homebuyers this year compared with last year."

The unexpected decrease by pending home sales reflected significant weakness in the Northeast and South, where pending home sales tumbled by 5.7 percent and 4.5 percent, respectively.

On the other hand, the report said pending home sales in the Midwest and West surged by 5.0 percent and 4.3 percent, respectively.

The National Association of Realtors released a separate report last Thursday showing existing home sales pulled back by much more than expected in the month of January.

NAR said existing home sales plunged by 8.4 percent to an annual rate of 3.91 million in January after surging by 4.4 percent to a downwardly revised rate of 4.27 million in December.

Economists had expected existing home sales to tumble by 3.5 percent to an annual rate of 4.20 million from the 4.35 million originally reported for the previous month.