US pending home sales fall to record low on weather, rates

PENDING sales of existing US homes slumped to a record low in January as severe winter weather slowed activity and consumers baulked at high prices and mortgage rates ahead of the vital spring selling season.

A gauge of contract signings on previously owned houses slipped 4.6 per cent in January to 70.6, the lowest in National Association of Realtors (NAR) data back to 2001, the group said on Thursday (Feb 27). The decline was larger than the median estimate of economists surveyed by Bloomberg, who expected a 0.9 per cent decrease.

Contract signings tumbled 9.2 per cent in the South – the biggest home-selling region in the country – parts of which experienced historic snowfall. That marked the biggest drop since the start of the Covid-19 pandemic.

“It is unclear if the coldest January in 25 years contributed to fewer buyers in the market, and if so, expect greater sales activity in upcoming months,” NAR chief economist Lawrence Yun said. “However, it’s evident that elevated home prices and higher mortgage rates strained affordability.”

The latest figures reinforce a generally downbeat vibe in US housing in recent weeks, as some of the momentum from November’s presidential election dissipated amid persistent high mortgage rates, which are stuck near 7 per cent. Last week, other NAR data showed existing-home sales, which measure closings, fell last month for the first time since September.

Moreover, home prices continue to rise and squeeze would-be buyers. National home prices rose 3.9 per cent in December from a year earlier, up from the 3.7 per cent annual gain seen a month earlier, according to data from S&P CoreLogic Case-Shiller.

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The median sale price of a previously owned home in the US was US$396,900 last month, according to NAR data, up 49 per cent from five years earlier.

Aside from the South’s big decline, contract signings had modest decreases in the Midwest and West, with the Northeast seeing a small gain in January.

Pending-homes sales tend to be a leading indicator for previously owned homes, as houses typically go under contract a month or two before they are sold. BLOOMBERG