The National Association of Realtors® reports that pending home sales increased in December after six consecutive months of declines after May 2022. In the Northeast and Midwest, there was a reduction in sales month-over-month, while in the South and West, there was a gain. The West experienced a 37.5% decrease in transactions year over year, which was the largest decline among the four U.S. regions.

December san an improvement of 2.5% to 76.9 in the Pending Home Sales Index (PHSI)* — a home sales forward-looking indicator based on contract signings. There was a 33.8% decline in pending transactions year-over-year. Contract activity in 2001 was equal to an index value of 100.

According to NAR Chief Economist Lawrence Yun, home sales activity appears to be recovering from its recent low point. Recent declines in mortgage rates have clearly contributed to stabilizing the housing market with sales driven largely by mortgage rates.

Regional Breakdown of Pending Home Sales

According to the Northeast PHSI, the index dropped 6.5% to 64.7 this month, a decrease of 32.5% from December 2021. December’s Midwest index dropped 30.1% from last year to 77.6, down 0.3%.

A drop of 34.5% from the prior year was recorded in the South PHSI in December, rising 6.1% to 94.1. A decrease of 37.5% from December 2021 was recorded in the West PHSI in December, rising 6.4% to 58.6.

In Yun’s view, rates for mortgages will likely range between 5.5% and 6.5% in the future. In the coming years, job gains will play an increasingly important role in driving home sales in local markets. Compared to the rest of the country, the South is expected to outperform the rest due to better job market conditions.