Housing Market Hits a Speed Bump
The US housing market experienced a sudden slowdown in December, breaking a four-month streak of growth. According to the National Association of Realtors (NAR), contracts to buy previously owned homes plummeted 5.5% last month, falling to 74.2 from a revised 78.5 in November. This decline was more pronounced than economists’ forecasts, which predicted no change in December following a 1.6% increase in November.
Regional Declines
The decline in pending home sales was widespread, with all four regions experiencing monthly and annual drops. The Northeast and West regions were hit the hardest, with declines of 8.1% and 10.3%, respectively. This sharp downturn is attributed to rising mortgage interest rates, which have eroded affordability, particularly in pricier regions.
Mortgage Rates on the Rise
The rate on popular 30-year-fixed-rate mortgages has surged above 7%, according to the Mortgage Bankers Association. This increase has effectively offset the interest rate cuts implemented by the Federal Reserve since September. The 10-year U.S. Treasury note, a key influencer of home loan rates, has also risen sharply, driven by concerns over inflation sparked by President Donald Trump’s policies, including tariffs, tax cuts, and immigration crackdowns.
A Setback, But Not a Surprise
Lawrence Yun, the NAR’s chief economist, noted that while the decline in contract signings is unwelcome news, it’s not entirely unexpected. After four consecutive months of growth, a slowdown was likely. However, the housing market remains vulnerable to fluctuations in mortgage rates and broader economic trends.
A Year-Over-Year Decline
Pending home sales fell 5.0% from a year earlier, highlighting the ongoing challenges facing the housing market. As mortgage rates continue to rise, affordability will remain a significant concern, potentially impacting the market’s ability to recover in the short term.
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