US pending home sales rose by the most since June 2020, potentially a temporary reprieve as lower mortgage rates in the month helped prop up demand.
The National Association of Realtors’ index of contract signings to purchase previously owned homes increased 8.1% in January from a month earlier to 82.5, according to data released Monday. The jump beat all estimates in a Bloomberg survey of economists, which called for a 1% advance.
Even with the surge at the start of the year, contract signings were down 22.4% from January 2022 on an unadjusted basis.
While high borrowing costs continue to pose a challenge for the housing sector, an easing in mortgage rates last month supported the pickup in buyer demand. Price cuts are also becoming more common, aiding affordability.
That said, mortgage rates have begun to tick back up — and the Federal Reserve is intent on jacking up interest rates even further — so it’s unclear when the housing market will truly turnaround.
“Home sales activity looks to be bottoming out in the first quarter of this year, before incremental improvements will occur,” Lawrence Yun, NAR’s chief economist, said in a statement.
