The National Association of Realtors said on Thursday its Pending Home Sales Index, based on contracts signed last month, decreased 3.7 percent to 100.7. The NAR also slightly revised down its index in November to 104.6, and cited a tighter inventory and an increase in house prices as reasons for discouraged buyers.
“Total inventory fell in December for the first time in 16 months, resulting in fewer choices for buyers and a modest uptick in price growth in markets throughout the country,” Lawrence Yun, chief economist at the NAR said. “With interest rates at lows not seen since early 2013, the strength in existing-sales in upcoming months will largely depend on the willingness of current homeowners to realize their equity gains from the past couple years and trade up.”
Contracts to buy previously owned U.S. homes, which usually become sales after a month or two fell more than economist’ expectations in December. Economists polled by Reuters had forecast total pending home sales rising 0.5 percent in December from the previously reported level.
Contracts declined in the four main regions of the country.
The Pending Home Sales Index in the Northeast saw the steepest decline, falling 7.5 percent to 82.1 in December. However, year-over-year, it is still 6.3 percent above a year ago. In the Midwest the index decreased 2.8 percent to 97.1 in December, and is only 1.9 percent above December 2013.
Pending home sales in the South declined 2.6 percent to an index of 116.6 in December, but are 8.6 percent above last December. The index in the West fell 4.6 percent in December to 94.0, but is 6.3 percent above a year ago.
“More jobs, increasing consumer confidence, less expensive mortgage insurance and new low down payment programs coming into the marketplace will likely lead to more demand from first-time buyers,” Yun said.
Compared to December of 2013, contracts were up 6.1 percent.