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Economy in Brief

U.S. Pending Home Sales Unexpectedly Decline in December
by Winnie Tapasanun  January 27, 2022

• Pending home sales -3.8% m/m, the second straight monthly drop and the largest since April.

• The December index at 117.7, the lowest level since September.

• Sales fall m/m and y/y in all the major regions with the deepest fall in the West (-10.0% m/m; -16.2% y/y).

The Pending Home Sales Index (PHSI) fell 3.8% m/m (-6.9% y/y) to 117.7 in December after a 2.3% decline in November (-2.2% initially) and a 7.5% rebound in October, according to the National Association of Realtors (NAR). For all of 2021, pending home sales rose 2.6% after having gained 6.9% in 2020 and 1.0% in 2019. The NAR reported that existing home sales are expected to fall 2.8% in 2022 with home prices expected to rise 5.1% “due to the ongoing housing shortage, even as builders ramp up production.”

Pending home sales decreased in all the major regions of the country in December. Sales in the West slid 10.0% (-16.2% y/y), the deepest m/m slide since February 2021, after a 2.1% decline. Sales in the Midwest fell 3.7% (-1.2% y/y), the third m/m fall in four months, after a 6.1% drop. Sales in the South decreased 1.8% (-3.9% y/y) on top of a 1.0% decline. Sales in the Northeast fell 1.2% (-10.5% y/y) following a 0.1% downtick.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar 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, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's PREALTOR database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the SURVEYW database.

Pending Home Sales (SA, % chg) Dec Nov Oct Dec Y/Y % 2021 2020 2019
Total -3.8 -2.3 7.5 -6.9 2.6 6.9 1.0
   Northeast -1.2 -0.1 6.9 -10.5 1.2 2.5 0.7
   Midwest -3.7 -6.1 11.9 -1.2 2.2 7.7 -0.3
   South -1.8 -1.0 7.7 -3.9 4.0 8.5 1.8
   West -10.0 -2.1 2.5 -16.2 1.3 5.9 1.1
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