Pending home sales decreased 7.7% to a reading of 80.4 in January from a downwardly revised 87.1 in December, originally reported as 87.7, according to an index released yesterday by the National Association of Realtors.
Thomson Reuters’ poll of economists had predicted an 85.1 reading.
The index is at its lowest level since it began in 2001, when the index value set at 100, NAR said.
Year-over-year the pending homes sales index was off 6.4% from last January, when the index was at 85.9.
NAR’s housing affordability index rose 13.6% in January to a record high 166.8. The index shows that the relationship between home prices, mortgage interest rates, and family income is the most favorable since tracking began in 1970, NAR said.
Regionally, pending sales were mostly lower. The West saw a 2.4% increase, while sales dipped 12.7% in the Northeast. In the Midwest, pending sales slumped 9.2%, and in the South they declined 11.9%.
“Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales,” said NAR chief economist Lawrence Yun. “We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit.”
Yun said he expects the market to rebound soon because of affordability.
“Conditions have been aligning very favorably for home buyers with the exception of consumer confidence,” he said. “But I am hopeful that sales will turn around by late spring and early summer because history suggests that home sales can rise even in times of job losses when housing affordability rises.”