With inventory constraints continuing to hold back prospective buyers, the National Association of Realtors released a report on Thursday showing a steep drop in U.S. pending home sales in the month of January.
NAR said its pending home sales index tumbled by 2.8 percent to 122.8 in January after rising by 0.5 percent to an upwardly revised 126.4 in December.
Economists had expected pending home sales to come in unchanged compared to the 0.3 percent dip originally reported for the previous month.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
“Pending home sales fell in January because there are simply not enough homes to match the demand on the market,” said Lawrence Yun, NAR’s chief economist. “That said, there has been an increase in permits and requests to build new homes.”
Yun said eight straight monthly increases in permits for single-family homes is a good sign the supply and demand imbalance in the residential real estate market could be easing, as soon as mid-2021.
“There will also be a natural seasonal upswing in inventory in spring and summer after few new listings during the winter months,” he added. “These trends, along with an anticipated ramp-up in home construction will provide for much-needed supply.”
The sharp drop in pending home sales in January reflected substantial decreases in pending sales in the West and Northeast, which plunged by 7.8 percent and 7.4 percent, respectively.
Pending home sales in the Midwest also fell by 0.9 percent, while pending home sales in the South inched up by 0.1 percent.
Data released by the Commerce Department on Wednesday showed a much bigger than expected jump in new home sales in the U.S. in the month of January.
The Commerce Department said new home sales spiked by 4.3 percent to an annual rate of 923,000 in January after soaring by 5.5 percent to a revised rate of 885,000 in December.
Economists had expected new home sales to surge up by 1.5 percent to a rate of 855,000 from the 842,000 originally reported for the previous month.
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