According to recent data on pending sales, the housing market is showing signs of heating back up. These early indicators suggest that home sales will see an upward trend this year. The National Association of Realtors predicts that falling mortgage rates will play a significant role in boosting home sales.
Last year was tumultuous for the housing market, with closed existing-home sales hitting a record low in nearly three decades. However, December’s pending sales data indicates a revival in the housing market ahead of the traditionally busy spring season.
The National Association of Realtors reported an 8.3% increase in contract signings in December compared to the previous month. Furthermore, it was 1.3% higher than the same month in 2022. As it usually takes a month or two for a home under contract to close, this data serves as an early predictor of future closed sales.
Lawrence Yun, the chief economist of the trade group, remarked, “The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices.” He also emphasized the importance of increased supply to meet the growing demand along with job additions and income growth enhancing housing affordability.
Mortgage rates have significantly declined from their peak levels last October. According to Freddie Mac, the average mortgage rate this week is 6.69%, down from a fall high of nearly 8%.
Forecasters anticipate further drops in mortgage rates. The National Association of Realtors predicts that the average mortgage rate will decrease to 6.1% by the fourth quarter. With declining mortgage rates, home sales are expected to rise. The trade group projects a 13% increase in existing-home sales and a growth of 15.2% in new home sales this year. However, price growth is expected to be modest. The trade group forecasts a 1.4% rise in existing-home prices to a median of $395,100 and a 2.7% increase in new home prices to $438,800.
The National Association of Realtors is not the only industry group projecting significant decreases in mortgage rates this year. Fannie Mae also expects rates to fall below 6% by the end of the year.