Harsh winter weather and affordability concerns were likely factors
of ConsumerAffairsJanuary usually provides insight into what the spring housing market will be like. The latest clue suggests there will be more homes and fewer buyers.
Pending home sales experienced a significant decline in January, falling 4.6%, according to the National Association of Realtors. This drop marks an all-time low for the Pending Home Sales Index (PHSI), which now stands at 70.6.
The index, a forward-looking indicator based on contract signings, reflects a challenging housing market environment exacerbated by high home prices and elevated mortgage rates.
Regionally, the South faced the steepest decline, with the PHSI falling 9.2% to 81.0, representing an 8.8% decrease from the previous year. The Midwest and West also saw reductions, with the Midwest index declining 2.0% to 72.8 and the West falling 1.2% to 57.6.
In contrast, the Northeast experienced a modest gain of 0.3%, bringing its index to 63.4, though it still reflects a 0.5% year-over-year decline.
NAR Chief Economist Lawrence Yun suggests the potential impact of the coldest January in 25 years could have had an impact on buyer activity. Improved weather conditions, he said, might lead to increased sales in the coming months.
However, Yun emphasized that the primary challenges remain high home prices and mortgage rates, which ranged from 6.91% to 7.04% in January. These factors have strained affordability, with the monthly mortgage payment on a $300,000 home rising by $50 compared to the previous year, reaching $1,590.
Despite these challenges, Yun expressed optimism about the future, noting that even a slight reduction in mortgage rates could stimulate buyer interest, especially given rising incomes, increased job opportunities, and more inventory choices.
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Posted: 2025-02-28 13:21:20
