Pending US Home Sales Slide to All-Time Low in January on Rates, Prices, Maybe Weather

The housing market in the United States continued its downward trend in January, with pending home sales sliding to an all-time low. The National Association of Realtors (NAR) reported that sales fell 4.9% last month from December, marking the fourth consecutive annual increase. However, the pace of 4.08 million units was well below economists' expectations of 4.11 million.

The decline in pending home sales can be attributed to a combination of factors, including rising mortgage rates and home prices. The average rate on a 30-year mortgage briefly fell to a 2-year low last September but has since hovered around 7% this year, more than double the 2.65% record low hit a little over four years ago. This increase in mortgage rates adds hundreds of dollars to monthly payments for borrowers, making homes less affordable.

The combination of elevated mortgage rates and steep home-price growth over the past few years has crimped affordability. For instance, borrowing $320,000 at the mid-December rate of 6.91% translates to a monthly principal-and-interest payment of $2,110, according to Bankrate's mortgage calculator. Borrowing the same amount at 8% translates to a monthly payment of $2,348, a difference of $238 per month. This affordability crunch has led to a slowdown in home sales, with sales volume remaining slow despite prices being at record highs.

In addition to rising mortgage rates and home prices, the weather may also play a role in the decline of pending home sales. Cold and snowy weather can deter potential buyers from visiting open houses and viewing properties, leading to a decrease in pending home sales. This is because buyers may be less likely to venture out in harsh weather conditions, especially if they have to travel long distances.

The weather can influence the housing market in several ways:

1. Reduced buyer activity: Cold and snowy weather can deter potential buyers from visiting open houses and viewing properties, leading to a decrease in pending home sales. This is because buyers may be less likely to venture out in harsh weather conditions, especially if they have to travel long distances.
2. Increased seller reluctance: Sellers may also be hesitant to list their homes during the winter months due to the weather. They may be concerned that their homes will not show well in cold or snowy conditions, or that potential buyers will be less likely to view their properties. This can lead to a decrease in the number of new listings, further slowing down the market.
3. Seasonal trends: The housing market typically experiences a slowdown during the winter months due to seasonal factors. This is a normal part of the market cycle and is not necessarily indicative of a larger trend. However, the combination of seasonal trends and harsh weather conditions can exacerbate the slowdown in pending home sales.

In the coming months, the weather may continue to influence the housing market, particularly in regions with harsh winter conditions. However, as the weather improves and the spring buying season approaches, the market is expected to pick up again. This is because buyers and sellers will be more likely to engage in the market as the weather becomes more favorable for property viewings and transactions.

In conclusion, the decline in pending home sales can be attributed to a combination of factors, including rising mortgage rates, home prices, and potentially the weather. While the weather may continue to influence the housing market in the coming months, the market is expected to pick up again as the weather improves and the spring buying season approaches.