Jan 29, 10:58 AM EST

US pending home sales tumble in December

AP Photo
AP Photo/Michael Dwyer
Business Video

Buy AP Photo Reprints
Painting Tips
Kid's Room Decor
How to Stage Your Home
Designing for Small Spaces
Tree Houses
Green Remodeling
Universal Design
Home Theater Basics
Home security products
Basement Renovations
How to Prep a Guest Room
Preparing your garden for winter
Go inside the smart home
Existing home sales interactive
Garage makeovers add value to homes
Keys to know when buying a condo
Real estate appraisal complaints
Trends in home offices
Baby-proofing your home
Latest bathroom trends
Latest trends in pools

WASHINGTON (AP) -- Fewer Americans signed contracts to buy homes in December, a sign that low mortgage rates have yet to coax more buyers into the market.

The National Association of Realtors said Thursday that its seasonally adjusted pending home sales index fell 3.7 percent last month to 100.7. The index ended the year below its 2013 average. But the Realtors project sales of existing homes will rebound in 2015 to 5.26 million, a 6.6 percent increase from last year.

Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.

Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said that there may have been some volatility due to the seasonal adjustments applied to a winter month when sales normally slow.

"(T)he trend in home sales is probably still up," O'Sullivan said, noting that more people identified "now" as a good time to buy a house in the University of Michigan consumer sentiment survey.

Lackluster wage growth and rising home prices stifled buying for much of 2014. This caused the share of Americans who own homes to dip to 64 percent at the end of last year, down from 65.2 percent a year ago, the Census Bureau reported Thursday.

Still, the affordability pressures should ease in 2015 due to strong job gains in recent months coupled with falling mortgage rates.

Rates for 30-year mortgages averaged 3.66 percent this week, down from 4.32 percent a year ago, according to the mortgage firm Freddie Mac. The drop has made it less expensive for buyers to borrow, enabling them to either save on monthly payments or afford larger and more expensive homes.

Strong job growth over the past year should help contribute to income gains and real estate sales.

The unemployment rate has plunged to 5.6 percent from 6.7 percent a year ago, as employers added nearly 3 million jobs last year, according to the Labor Department. While average wages have basically kept pace with inflation, the job growth has increased the number Americans with paychecks - which may spur more home sales this year.

Construction firms still expect growth this year, although their enthusiasm has waned slightly. The National Association of Home Builders/Wells Fargo builder sentiment index fell slightly this month to 57, down one point from a revised reading of 58 in December. Despite the decrease, any reading above 50 indicates that more builders view sales conditions as good rather than poor.

© 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.

Latest News