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Fewer home buyers signed contracts to purchase a property in December, breaking a four-month streak of gains for pending home sales. The National Association of REALTORS®’ Pending Home Sales Index—a forward-looking indicator of home sales—showed contract signings fell 5.5% month over month in December and were down 5% from a year earlier.
This marks a weak ending to a difficult year for home sales in 2024, which saw the lowest level for existing-home sales in nearly 30 years, NAR recently reported.
Real estate professionals are likely eager to put last year’s sales numbers in the rearview mirror as economists predict a housing turnaround in 2025.
Still, “after four straight months of gains in contract signings, one step back is not welcome news,” says NAR Chief Economist Lawrence Yun. “But it is not entirely surprising. Economic data never moves in a straight line.” Plus, home sales in the winter typically are slower than in the spring or summer seasons, and heavier-than-usual winter precipitation for many parts of the country may have also played a hand in slowing pending sales.
Nevertheless, buyer demand has remained resilient: Yun says mortgage rates hovering near 7% in recent weeks has not “significantly dented housing demand.” He also noted that an elevated level of cash sales—which grew to a 28% share of transactions in December—is enabling some buyers to bypass a mortgage altogether.
However, higher-priced areas in the West and Northeast regions may have seen the largest impact on affordability from higher mortgage rates. Contract signings in the West fell 10.3% in December and 8.1% in the Midwest. Meanwhile, more affordable regions, like the South (down 2.7%) and Midwest (down 4.9%), saw less significant drops in contract signings. Recent job and wage gains may be having “a greater impact in more affordable regions” of the country for home sales, Yun says.
As inventory opens up, Yun expects greater home sales to follow suit. Last week, when reporting the latest on existing-home sales, Yun noted recent rises in the number of listings—up 16% annually in December—will help lead to more home sales over the coming months.
More Buyers Eye the New-Home Market
Meanwhile, new-home sales are on the rise. Sales of newly built single-family homes in December rose 3.6% compared to November and are up 6.7% from a year earlier, the Department of Housing and Urban Development and the Census Bureau reported this week. For 2024, new-home sales ended the year 2.5% higher than in 2023, marking a stronger year for the sector.
“New-home sales ended 2024 higher on ongoing limited resale inventory conditions,” says Carl Harris, chairman of the National Association of Home Builders. “Builders are cautiously optimistic about the building market for 2025” and are forecasting the momentum to continue with further gains in sales this year.
Builders are offering up more supply, with new single-family home inventory in December up 10% compared to a year earlier. The new-home market has more inventory now than at any point since 2012, the builder’s group says. Plus, builders are looking to court more buyers with discounts and sales incentives. Sixty-one percent of builders reported using sales incentives, like buying down mortgage rates. Thirty percent of builders report cutting home prices in January, with an average price reduction of 5%.
The median new-home sales price in December was $427,000, coming closer in line to the median existing-home sales price of $407,500.
