Following a 4.3% slump in December, pending home sales saw a strong monthly gain in January, supported by solid job growth and low mortgage rates.
The Pending Home Sales Index (PHSI), reported by the National Association of Realtors (NAR), is a forward-looking indicator based on signed contracts. The PHSI grew 5.2% from 103.4 in December to 108.8 in January, the highest reading in two years. This is also the biggest monthly gain since October 2010. On a year-over-year basis, sales were 5.7% higher than a year ago.
Regionally, three of the four major regions saw an increase in the PHSI. The PHSI in the Northeast, Midwest and South grew 1.3%, 7.3% and 8.7% in January, while sales in the West fell 1.1%. Year-over-year, the PHSI grew in all four major regions, ranging from an increase of 1.2% in the Northeast to 7.1% in the South.
This month gains were driven by healthy economic environment as well as low mortgage rates. Meanwhile, new home sales in January soars to highest level since 2007. However, future growth will depend on whether home builders bring more affordable homes to the market, as December and January combined supply was at the lowest level since 1999. More inventory will help to prevent prices rising too fast and make homeownership more accessible. However, concerns linger about the coronavirus.