US DATA
Pending home sales unexpectedly contracted in December, raising doubt over whether a nascent uptick in home sales at end-2024 can be sustained in 2025.
- Pending sales dropped 5.5%, vs 1.6% prior (downward rev from 2.2%) and expecfations of flat growth, marking the first drop after 4 consecutive increases. On a Y/Y NSA basis, sales fell 2.9% (4.9% prior rev, positive 4.2% expected).
- All four US regions saw M/M and Y/Y drops, with contract signings dropping the most in the West region on a monthly basis, with the Midwest seeing the largest annual fall. The index level of 74.2 implies activity more than 25% below 2001 levels (=100).
- This is a leading indicator of sales activity, as can be seen in the accompanying chart vs existing sales, casting serious doubt on whether December's existing home sales momentum (10-month high) can be sustained.
- The NAR press release pointed out that "high mortgage rates have not significantly dented housing demand due to greater numbers of cash transactions", though they noted "Contract activity fell more sharply in the high-priced regions of the Northeast and West, where elevated mortgage rates have appreciably cut affordability,”"
- As we continue to point out though, while further improvement in home sales is plausible from such weak levels, there's unlikely to be any renewed dynamism unless interest rates fall substantially or unemployment picks up. Until then, we expect the housing market to be in a period of stasis.
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