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Latest Data on Pending Home Sales Reveals Glimmer of Hope

Latest Data on Pending Home Sales Reveals Glimmer of Hope

Are we seeing the start of a market rebound, and if yes, how long may the recovery take or are we just being too optimistic as interest rates rise again? Experts weigh in.

The National Association of Realtors (NAR) just released data on pending home sales, and the results were not all that bad – some might even call them promising.

NAR data showed that contract signings rose for the second consecutive month in January, up 8.1% from the month prior and reaching their highest point since June 2020. It attributed the rise to falling mortgage rates in December and January.

But while all four regions of the U.S. saw gains month over month, pending transactions across the board were down compared to last year. And, when you look at the numbers year over year, the picture is a bit bleaker, with pending home sales down 24% overall.

So, what does the latest data mean?

Is it good, is it bad? Does it mean the market is rebounding, or have we yet to hit bottom?

NAR Chief Economist Lawrence Yun predicts that things will begin to turn around, although it may take some time.

“Home sales activity looks to be bottoming out in the first quarter of this year, before incremental improvements will occur,” Yun said. “But an annual gain in home sales will not occur until 2024. Meanwhile, home prices will be steady in most parts of the country with a minor change in the national median home price.”

Bright MLS Chief Economist Lisa Sturtevant said the latest pending home sales numbers basically mean that the market is in recovery, but the road will be long and uneven. Sturtevant told USA Today that the recent numbers indicate that the market may have bottomed out at the end of 2022, and that a rebound is in the works.

“However, it likely won’t be a V-shaped rebound,” Sturtevant said. “Instead, expect a bumpy road on the way to a more normal housing market in 2023.” Economic Data Analyst Hannah Jones said that while the latest data suggests a future rebound, the fact remains that mortgage rates resumed their climb in February, and the next round of numbers will likely reflect this fact.

“However, the first month of the year brought glimmers of hope as year-over-year declines in both Existing and New home sales slowed, and buyer sentiment improved slightly,” Jones recently wrote. “The spring season typically brings increased buyer demand and therefore competition as homebuying season kicks off. This spring is expected to be less active than the last couple of years as affordability challenges persist.”

Buyer activity stabilizes as mortgage rates land at around 6%

Redfin said earlier this year that agents are reporting an uptick in buyer activity as mortgage rates began to stabilize around 6%. Redfin Economics Research Lead Chen Zhao said with the fall’s rate volatility in the rearview and inflation cooling, buyers are feeling more confident.

“When rates were seesawing up and down in the fall, many buyers dropped out because they could wake up the day after finding their dream home to a three-digit increase in their potential monthly payment,” Zhao said in a statement. “[Recently] they [had] a better sense of how far their budget will go in which neighborhoods and which homes they can afford.”

It seems that while most market watchers vary in their predictions of when, exactly, we will see the emergence of a stronger housing market, most agree that NAR’s recent data stands as a beacon of hope, signaling that a long-awaited recovery may finally be in the works. But just how long that recovery will take is anybody’s guess. And what negative influence a rate of 7%+ could have on that enthusiasm is yet to be fully baked-in to the predictions.