Housing supply

Pending home sales plummet as housing supply dwindles, leaving buyers with ‘very few options’

Numbers: Pending home sales fell 3.8% in December, according to the monthly index released by the National Association of Realtors. The index measures transactions where the contract has been signed for the sale of an existing home, but the sale has not yet been completed. As such, it is an indicator of the direction of existing home sales over the coming months.

Key details: Compared to a year earlier, pending home sales were down 6.9%. On a regional basis, pending sales fell 10% or more in the Northeast and West, although all regions of the country experienced a slowdown.

The big picture: The slowdown in pending home sales was a reflection of inventory issues home buyers have been facing, Lawrence Yun, chief economist for the National Association of Realtors, said in the report.

“Pending home sales faded towards the end of 2021 as the dwindling housing supply left consumers with very few options,” Yun said. “Mortgage rates have risen steadily over the past few weeks, which will unfortunately eventually drive out marginal buyers.”

The good news for potential buyers, Yun said, is that the supply of homes for sale should improve over the course of the year amid a surge in homebuilding activity. Still, Yun predicts that existing home sales will be nearly 3% lower in 2022 than they were in 2021.

What they say : “While the index fell in seven of the 12 months of 2021, the annual value was higher than the previous two years, indicating an increase in overall housing activity, also reflected in the higher pace of sales,” said George Ratiu, head of economic research at Realtor.com.