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48 | M REPORT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Pending Home Sales Increase, Breaking a Six-Month Downturn "This recent low point in home sales activity is likely over," said Lawrence Yun, NAR's Chief Economist. "Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market." A ccording to the Pend- ing Home Sales Index (PHSI) released by the National Association of Realtors (NAR), pending home sales increased 2.5% nationally, breaking a six-month streak of worsening numbers that began in May 2022. The index now stands at 76.9 points as of December 2022. Year over year, pending transactions dropped by 33.8%. An index num- ber of 100 was benchmarked to home sales when the report was created in 2001. "This recent low point in home sales activity is likely over," said Lawrence Yun, NAR's Chief Economist. "Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market." Of the four major geographical regions of the country, the West reported the largest growth of the group at 6.4% in December to an index of 58.6 but overall decreased by 37.5% year over year. The South saw the second- highest growth at 6.1% to an index of 94.1 but dropped year over year by 34.5%. However, the PHSI dropped in the other two regions of the country. In the Northeast, the PHSI dropped 6.5% from December to an index of 64.7%, a decline of 32.5% over December 2021. The Midwest index shrank by the least—or 0.3%—to an index of 77.6, a decline of 30.1% year over year. "The new normal for mortgage rates will likely be in the 5.5% to 6.5% range," Yun added. "Job gains will steadily become important in driving local home-sales markets. The South, in particular, is set to outperform the rest of the country, thanks primarily to better job market conditions in this part of the country compared to other regions." The PHSI is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. Realtor.com Economic Data Analyst Hannah Jones responded to the report, saying: "December's contract signings reflected the housing market's ongoing struggle with afford- ability, as ample housing demand remained frozen by high prices and mortgage rates," Jones said. "Though mortgage rates fell as low as 6.27% in December, down 0.8 percentage points from November's high, home prices remained elevated, up 8.4% com- pared to the previous year." "To the delight of many, mort- gage rates have continued to fall, dropping to levels not seen since September, offering buyers the opportunity to dip a toe back into the market. Even with December's retreat though, mortgage rates remained more than three percentage points higher than the previous year, which means that the mortgage payment for a median-priced home was $730 higher than in December 2021. As a result, many buyers stuck to the sidelines, waiting for conditions to improve." "Though the market is still tipped in sellers' favor, many homeowners have reconsidered their plans to sell as fewer buyers competing means less potential upside," Jones concluded. "The ongoing lack of affordability has curbed buyer activity this winter, but lower interest rates and the coming spring homebuying season promise more opportunities for buyers and sellers alike." First American Deputy Chief Economist Odeta Kushi also com- mented on the report. "December 2022 pending-home sales improved for the first time since May 2022, increasing 2.5% from November but remaining 34% lower com- pared with one year ago," Kushi said. "Pending-home sales are a forward-looking indicator of home sales based on contract signings." "We now have multiple leading housing indicators that are point- ing to modestly higher sales activ- ity," Kushi continued. "Mortgage