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Economy in Brief

U.S. Pending Home Sales Rebound Amidst Lower Interest Rates
by Gerald D. Cohen  February 27, 2020

• Pending home sales jumped 5.2% in January after falling 4.3% in December.

• Prospective sales rose in all regions except the West.

The National Association of Realtors (NAR) reported that pending home sales gained 5.2% in January (5.7% year-on-year), more than reversing December's 4.3% drop. Mortgage rates fell with the effective rate on a 15-year fixed-rate mortgage declining to 3.33% in January, the lowest level since late 2016. Rates have fallen further since then, with the latest weekly reading of 3.23% The declining trend in interest rates has had a positive impact on housing activity. Pending sales are up 9.6% since the four-and-a-half year low reached at the end of 2018, when mortgage rates hit 4.71%.

The number of signed contracts in December increased in every region of the country except the West, where they declined 1.1% (+5.5% y/y). Pending sales jumped 8.7% and 7.3% in the South and Midwest (7.1% and 6.5% y/y respectively). Activity was up 1.3% in the Northeast (1.2% y/y).

The pending home sales index measures sales at the time the contract for an existing home is signed, analogous to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity anticipates the level of closed existing home sales in the following two months. The series dates back to 2001, and the data are available in Haver's PREALTOR database. Mortgage interest rates from the Mortgage Bankers Association can be found in the SURVEYW database.

Pending Home Sales (SA, % chg) Jan Dec Nov Jan Y/Y % 2019 2018 2017
Total 5.2 -4.3 0.7 5.7 1.1 -4.1 -0.8
   Northeast 1.3 -2.7 -0.6 1.2 0.8 -5.0 0.6
   Midwest 7.3 -3.4 1.6 6.5 -0.3 -4.6 -2.5
   South 8.7 -3.8 -1.0 7.1 1.8 -1.9 0.6
   West -1.1 -7.1 4.2 5.5 1.3 -7.3 -2.5
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