US pending home sales fall as rising prices slow momentum

Washington

A GAUGE of US pending home sales fell for the fourth consecutive month in December, reflecting further weakness in the Midwest as rising prices slowed momentum in the housing market.

The National Association of Realtors' (NAR) index of pending home sales decreased 0.3 per cent to 125.5 after a revised 2.5 per cent decline in November, showed data released last Friday. The median estimate in a Bloomberg survey of economists called for a retreat of 0.5 per cent in December.

The decline underscores the difficulties of further upward momentum in the housing market as the lack of available properties drives up asking prices and restrains demand.

Contract signings are still up 22.8 per cent from a year earlier on an unadjusted basis, highlighting the strides residential real estate has made amid record-low mortgage rates and buyer preferences for larger homes that double as office space.

"There is a high demand for housing and a great number of would-be buyers, and therefore sales should rise with more new listings," Lawrence Yun, chief economist at the NAR, said in a statement.

"This elevated demand without a significant boost in supply has caused home prices to increase and we can expect further upward pressure on prices for the foreseeable future."

By region, pending home sales declined 3.6 per cent in the Midwest, the fourth straight decrease.

In the largest US region - the South - contract signings edged up 0.1 per cent. Pending sales were unchanged in the West and rose in the Northeast.

The housing market is one of the economy's bright spots. In the fourth quarter, residential investment increased at a 33.5 per cent annualised rate after a 63 per cent pace, the government's latest reading on gross domestic product showed. BLOOMBERG