A report released by the National Association of Realtors on Friday showed pending home sales in the U.S. fell by more than expected in the month of December.
NAR said its pending home sales index slipped by 0.3 percent to 125.5 in December after tumbling by 2.5 percent to 125.9 in November. Economists had expected the index to edge down by 0.1 percent.
Pending home sales decreased for the fourth consecutive month but were still up by 21.4 percent compared to the same month a year ago.
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.
“Pending home sales contracts have dipped during recent months, but I would attribute that to having too few homes for sale,” said NAR chief economist Lawrence Yun. “There is a high demand for housing and a great number of would-be buyers, and therefore sales should rise with more new listings.”
He added, “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.”
The continued decrease in pending home sales was led by a steep drop in pending sales in the Midwest, which plunged by 3.6 percent.
Meanwhile, pending home sales in the South and West were largely unchanged, while pending home sales in the Northeast jumped by 3.1 percent.
With mortgage rates expected to remain low, Yun expects existing home sales to reach 6.49 million in 2021, which would reflect a 15 percent spike from 5.64 million in 2020.
“There will also be slower home price appreciation, likely 6.6%, as increased confidence from homebuilders will ultimately lead to an increase in housing starts,” Yun said.