The housing market took a dramatic shift to round out 2024 as pending home sales decreased to 5.5% in December.
The drop was significant after four straight months of increases, according to the National Association of Realtors®.
“Buyers pulled back in response to climbing mortgage rates. Contract signings fell 5% year over year, the biggest annual dip since July,” says Realtor.com® senior economic research analyst Hannah Jones.
Pending homes sales, or contract signings, measure the first formal step in a home sale transaction—the point when a buyer and seller have agreed on the price and terms.
Pending homes sales declined in all four regions in the U.S. compared with a month ago.
The West experienced the most significant drop month over month.
Meanwhile, year over year, pending home sales were also down in all four regions—the Midwest saw the biggest contract signing drop.
As Jones mentioned earlier, mortgage rates play a role as rates are still hovering close to 7%—at 6.95%.
Deal breaker
The West’s pending homes sales index (PHSI) saw a 10.3% plunge from the prior month, to 57.7. It’s significant when you compare that number with December 2023, when it was down 5.1%.
The Northeast PHSI dropped to 52.2 in December 2024, an 8.1% change compared with November, but it’s down 1.3% from December 2023.
The South PHSI declined 2.7% to 90.6 in December and down 5.1% from a year ago.
The biggest yearly change occurred in the Midwest, where it was down 6.9% compared with December 2023. Month over month, the Midwest shrank 4.9% to 74.3 in December 2024.
“Pending home sales tend to lead existing-home sales by roughly one to two months and are a good indicator of market conditions,” explains Jones.
“The new administration has introduced some uncertainty to the housing market as buyers and sellers evaluate the possible impacts of President Trump’s housing policies on mortgage rates and home prices. However, the seasonal easing of home prices, high inventory, and relatively stable, though high, mortgage rates have contributed to steady market activity.”
Meanwhile, new-home sales, which are also based on contract signings, climbed 3.6% monthly and 6.7% annually in December, with more affordable inventory driving sales.
“Though mortgage rates continue to be a challenge, affordable new construction remains an attractive option for home shoppers,” adds Jones.