Contracts to purchase previously owned homes rose less than forecast in December, indicating more tempered progress in residential real estate early this year.
The index of pending home sales rose 0.1% after a revised 1.1%
The report shows the market is constrained by rising property prices and a limited supply of listed homes. At the same time, steady job creation and mortgage rates that remain near historically low levels should help support demand.
"While sustained job creation is spurring more activity compared to a year ago, the ability to find available homes in affordable price ranges is difficult for buyers in many job creating areas," NAR chief economist Lawrence Yun said in a statement. "With homebuilding still grossly inadequate, steady price appreciation and tight supply conditions aren't going away any time soon."
Estimates in the Bloomberg survey of 38 economists ranged from a drop of 2% to a gain of 4%. The Realtors' group previously reported a November decline of 0.9%.
The warmest December on record helped elevate prospective homebuyer traffic in the Northeast, the only region to show a gain in contract signings. Pending sales rose 6.1% in that area, while they fell 2.1% in the West and 1.1% in the Midwest.
Compared with a year earlier, the index increased 3.1% on an unadjusted basis, after a 4.9% advance in the prior 12-month period.
The pending sales gauge was 106.8 on a seasonally adjusted basis, the second-weakest since January 2015. A reading of 100 corresponds to the average level of contract activity in 2001, or "historically healthy" home-buying traffic, according to the NAR.
Economists consider pending sales a leading indicator because they track contract signings. Purchases of existing homes are tabulated when a deal closes, typically a month or two later. Resales make up more than 90% of the housing market, with new-home purchases accounting for the rest.
Home resales jumped in December by the most on record, wrapping up the best year since 2006, the Realtors' data showed this month. The surge was helped in part by the warmer weather and industry adjustments to new mortgage regulations that had delayed closings a month earlier.
The Federal Reserve this week opened the door to a change in their outlook for the economy, and possibly a slower pace of interest-rate hikes that would make a move in March less likely. Policy makers said they still expect to raise borrowing costs at a "gradual" pace while watching to see how the global economy and markets impact the U.S. outlook.
"The silver lining from the market turmoil in recent weeks is the fact that mortgage rates have slightly declined," Yun said. "Buyers looking to close on a home before the spring buying season begins may be rewarded with a mortgage rate at or below 4%."
