U.S. pending home sales rose by the most since June 2020, potentially a temporary reprieve as lower mortgage rates in the month helped prop up demand.
The National Association of Realtors' index of contract signings to purchase previously owned homes increased 8.1% in January from a month earlier to 82.5, according to data released Monday. The jump beat all estimates in a Bloomberg survey of economists, which called for a 1% advance.
Even with the surge at the start of the year, contract signings were down 22.4% from January 2022 on an unadjusted basis.
While high borrowing costs continue to pose a challenge for the housing sector, an easing in mortgage rates last month supported the pickup in buyer demand. Price cuts are also becoming more common, aiding affordability.
That said, mortgage rates have begun to tick back up — and the Federal Reserve is intent on jacking up interest rates even further — so it's unclear when the housing market will truly turnaround.
"Home sales activity looks to be bottoming out in the first quarter of this year, before incremental improvements will occur," Lawrence Yun, NAR's chief economist, said in a statement.
Signings rose in all four regions in the month, led by a more than 10% gain in the West.
"An extra bump occurred in the West region because of lower home prices, while gains in the South were due to stronger job growth in that region," Yun said.
Separate data out last week showed that sales of previously owned US homes fell for a
The pending home sales report is often seen as a leading indicator of existing home sales given homes typically go under contract a month or two before they're sold.
