Signed contracts to buy previously owned homes in the U.S. unexpectedly rose in December for the first time in seven months as high mortgage rates continued to decline, offering some relief for prospective homebuyers.
The National Association of Realtors said on Friday that its pending home sales index climbed 2.5% over the course of December, marking the first monthly increase in pending home sales since May. Economists surveyed by Refinitiv expected contracts to edge down by 0.9%.
However, the housing market has yet to climb out of its deep hole: Sales were still down 33.8% in December when compared with the previous year.
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“This recent low point in home sales activity is likely over,” Lawrence Yun, the NAR’s chief economist, said in a statement.
The interest rate-sensitive housing market has borne the brunt of the tighter policy, with mortgage rates more than doubling over the course of the year. Home sales evaporated and prices began to decline from record highs.
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Policymakers already lifted the benchmark federal funds rate seven consecutive times in 2022 and have indicated they plan to continue raising rates higher this year as they try to crush inflation that is still running abnormally high.
But demand has shown early signs of returning as mortgage rates continue to fall: the average rate for a 30-year fixed mortgage dropped to 6.13% this week, according to data from mortgage lender Freddie Mac. That is still significantly higher than just one year ago when rates hovered around 3.56%.
Mortgage applications are up 28% from early November, according to a separate report from Redfin, which has sent the typical homebuyer’s mortgage payment down about 10% – or roughly $180 – since the fall.
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Even with higher interest rates putting homeownership out of reach for millions of Americans, prices are still steeper than just one year ago. The median price of an existing home sold in December was $372,700, a 2% increase from the same time a year ago, according to the National Association of Realtors.
That marks the 130th consecutive month of year-over-year home price increases, the longest-running streak on record.
