WASHINGTON (February 27, 2025) – Pending home sales pulled back 4.6% in January according to the National Association of REALTORS®. The Midwest, South and West experienced month-over-month losses in transactions – with the most significant drop in the South – while the Northeast saw a modest gain. Year-over-year, contract signings lowered in all four U.S. regions, with the South seeing the greatest falloff.
The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – fell 4.6% to 70.6 in January, an all-time low. (Last year's cyclical low point in July 2024 was revised from 70.2 to 71.2.) Year-over-year, pending transactions declined 5.2%. An index of 100 is equal to the level of contract activity in 2001.
"It is unclear if the coldest January in 25 years contributed to fewer buyers in the market, and if so, expect greater sales activity in upcoming months," said NAR Chief Economist Lawrence Yun. "However, it's evident that elevated home prices and higher mortgage rates strained affordability."
Housing affordability suffered in January as mortgage rates ranged from 6.91% to 7.04%. Compared to one year ago, the monthly mortgage payment on a $300,000 home increased by an extra $50 to $1,590.Interest Rates:
Rates could easily move higher or lower, and unscheduled, unexpected events can ultimately have the most say in the direction. The Federal Reserve’s aggressive moves to combat inflation have put upward pressure on mortgage rates.
What Does this mean for you?
Both buyers and sellers will need to go with the flow in the current market. Sellers need to be flexible on sales prices given the challenges created by the sharp increase in mortgage rates. Buyers should be prepared for the sticker shock associated with the increased expense of financing the purchase. Buyers may want to consider a possible downgrade of size or quality of a home, along with the neighborhood, in order to achieve an affordable purchase. As home prices continue to adjust the average time active listings stay on the market is getting longer, resulting in a slightly less competitive market, but this is good news for homebuyers who are still in the game.
Rentals:
Tenants in rental buildings that are in foreclosure now have more protection. The law requires that banks, receivers, and other entities that take control of a foreclosed residential property cannot terminate a valid lease until the end of the lease term. Then, whoever is in control of the property must provide at least ninety days written notice to the tenant. However, a person who acquires property and intends to make it his or her primary residence can terminate an existing lease with ninety days notice.
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