Pending home sales increased slightly in December

Pending home sales increased slightly in December, fueled by a pickup in the pace of purchases in the Northeast.

The National Association of Realtors (NAR) said Thursday that its sales index measuring contract signings — a forward-looking indicator — increased by only 0.1 percent to 106.8 in December, from 106.7 in November.

{mosads}Sales are 4.2 percent above December 2014, and the index has increased year-over-year for 16 straight months.

Contract activity lost some momentum toward the end of the year everywhere except in the Northeast. 

“Warmer than average weather and more favorable inventory conditions compared to other parts of the country encouraged more households in the Northeast to make the decision to buy last month,” said Lawrence Yun, NAR chief economist.

“Overall, while sustained job creation is spurring more activity compared to a year ago, the ability to find available homes in affordable price ranges is difficult for buyers in many job-creating areas,” Yun said.

“With homebuilding still grossly inadequate, steady price appreciation and tight supply conditions aren’t going away any time soon.” 

Regionally, pending sales in the Northeast increased 6.1 percent, and were down 1.1 percent in the Midwest, 0.5 percent in the South and 2.1 percent in the West.

Yun expressed concern that turbulent stock markets and the slowing energy sector could weigh on home buying over the next few months even amid strong labor market conditions.

“The silver lining from the market turmoil in recent weeks is the fact that mortgage rates have slightly declined,” Yun said. “Buyers looking to close on a home before the spring buying season begins may be rewarded with a mortgage rate at or below 4 percent.”

NAR expects existing-homes sales this year to hit around 5.34 million, an increase of 1.5 percent from 2015.

The national median existing-home price is expected to increase between 4 and 5 percent this year. 

In 2015, existing-home sales increased 6.5 percent and prices rose 6.8 percent.

Rents, which have far outpaced wages in recent years, are expected to slow slightly to 3.3 percent growth in 2016 from 3.6 percent a year ago.

Multifamily housing construction, which has outperformed in recent years with growing demand for rentals, is expected to reach 420,000 units this year, the highest level since 1987.