Pending home sales in the US stalled in January, latest NAR index reveals

Pending home sales in the United States were essentially unchanged in January with gains in some states being offset by declines in others, the latest index report from the National Association of Realtors shows.

In particular monthly gains in the South and Northeast were offset by declines in the West and Midwest, according to the index which is a forward looking indicator based on contract signings.

Overall the index edged up 0.1% to 95 in January from an upwardly revised 94.9 in December, but is 9% below January 2013 when it was 104.4. The December index reading was the lowest since November 2011, when it stood at 94.6.

Lawrence Yun, NAR chief economist, said that factors which dampened December activity were also at play in January. ‘Ongoing disruptive weather patterns in much of the US inhibited home shopping. Limited inventory also is playing a role, especially in the West, while credit remains tight and affordability isn’t as favourable as it was a year ago,’ he explained.

The index in the Northeast rose 2.3% to 79 in January, but is 5.3% below a year ago. In the Midwest the index declined 2.5% to 92.9 in January, and is 9.3% lower than January 2013. Pending home sales in the South increased 3.5% to an index of 111.2 in January, and is 5.5% below a year ago. The index in the West fell 4.8% in January to 84.2, and is 17.5% below January 2013.

Existing home sales are expected to be weak in the first quarter, while prices continue to rise from limited inventory. ‘Increasing new home construction can quickly solve two problems, producing more inventory and taming price growth,’ Yun pointed out.

The pace of sales should pick up in the middle part of the year. Total existing home sales are projected at just over five million in 2014, slightly below the volume recorded last year.

The national median existing home price is forecast to grow in the range of 5% to 6% this year.