The number of consumers who started the process of buying a home decreased in December, reversing the modest gains in November, according to the latest data from the National Association of Realtors (NAR).
Thursday, the NAR said its pending home sales index fell 3.7% to 100.7 in December, following November’s revised reading of 104.6. However, the association said the index is 6.1% above the December 2013 reading.
Economists were optimistic heading into the report; according to consensus forecasts, economists expected the index to rise about 0.6%. Economists pay attention to pending home sales because it is seen as a barometer for the housing market. There is typically a one-to-two month lag between signing a contract and a completed sale.
Lawrence Yun, NAR chief economist, said that the reason behind the decline in the number of pending sales is because of a slight acceleration in prices as a result of fewer homes available on the market.
“Total inventory fell in December for the first time in 16 months, resulting in fewer choices for buyers and a modest uptick in price growth in markets throughout the country,” he said. “With interest rates at lows not seen since early 2013, the strength in existing-sales in upcoming months will largely depend on the willingness of current homeowners to realize their equity gains from the past couple years and trade up,” said Lawrence Yun, NAR chief economist.
Gennadiy Goldberg, U.S. strategist at TD Securities, shook off the weaker than expected numbers?, saying that seasonal factors could have lead to the decline.