Gauge of U.S. pending home sales declines to a six-month low

A gauge of U.S. pending home sales fell to a six-month low in January as buyers competed for a limited number of properties.

The National Association of Realtors’ index of pending home sales decreased 2.8% from the prior month to 122.8, according to data released Thursday. December data was revised to a 0.5% gain after a previously reported decline. The median estimate in a Bloomberg survey of economists called for no change in January.

The decline is the latest sign that the housing boom may be starting to cool amid soaring prices, a lack of inventory and rising mortgage rates. The residential real estate market has been a bright spot in the economy as it recovers from the pandemic. Contract signings are still up 8.2% from a year ago on an unadjusted basis.

“There are simply not enough homes to match the demand on the market” Lawrence Yun, chief economist at the NAR, said in a statement. Still, Yun said he expects inventory to rise in the coming months.

The lack of inventory thus far has driven prices upwards, putting homeownership out of reach for some, said Joel Kan, the Mortgage Bankers Association's associate vice president of economic and industry forecasting.

“Various other data sources have pointed to higher median sales prices and record-high purchase mortgage loan sizes, all of which have started to create affordability challenges in many parts of the country," he said. "While home building has picked up to attempt to meet the high demand, increased listings of existing homes will be needed in the coming months to alleviate this shortage of housing inventory.”

By region, contract signings fell in the West, Northeast and Midwest. In the South, the index for pending home sales rose to the highest since August.