Pending home sales drop sharply in December as mortgage rates surge back over 7%
Signed contracts on existing homes dropped a sharp 5.5% in December from the previous month and fell 5% from the prior year, according to the National Association of Realtors.
Signed contracts on existing homes dropped a sharp 5.5% in December from the previous month and fell 5% from the prior year, according to the National Association of Realtors.
The drop followed four straight months of gains and the index was at its lowest level since August.
These so-called pending sales are an indicator of future closings and are the most current indicator of activity in the market. Buyers out shopping in December were facing a big jump in mortgage interest rates, which may have dampened demand.
The average rate on the 30-year fixed mortgage went from a low of 6.68% on Dec. 6 to a high of 7.14% on Dec. 19. Realtors had been saying that buyers were getting used to a “new normal” of higher interest rates, but the 7% mark appears to be an emotional barrier for buyers.
Sales of newly built homes, which are also based on signed contracts, saw gains in December, according to the U.S. Census, but homebuilders have been aggressively buying down mortgage rates to get customers in the door.
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