The U.S. housing market has been on a rollercoaster ride since the start of the COVID-19 pandemic. However, a recent report from the National Association of Realtors (NAR) suggests some light might be at the end of the tunnel for prospective homebuyers and sellers.
Pending Home Sales Rise
According to the NAR, the Pending Home Sales Index – which measures signed contracts for home sales – rose by 8% in January. This follows a similar uptick in December and could suggest that the housing market is finally stabilizing after months of uncertainty.
So, what does the recent surge in pending contracts mean for buyers and sellers, and what can we expect from the housing market in the coming months?
Improving Affordability for Buyers
The increase in pending home sales can largely be attributed to a slight decline in mortgage rates in December and January.
This improvement in affordability has made it more attractive for buyers to enter the market and could be a sign that we'll see more activity in the coming months.
"Buyers responded to better affordability from falling mortgage rates in December and January," said NAR Chief Economist Lawrence Yun.
However, Yun also cautioned that this uptick in activity might only last a while. He expects existing-home sales to drop by 11% in 2023 before rebounding in 2024.
Bumpy Road Ahead
While the recent increase in pending contracts is undoubtedly a positive sign, it's important to remember that the housing market still faces some headwinds.
For example, mortgage rates have been trending higher in recent weeks, and the Federal Reserve has indicated that it will continue to raise rates in the coming year.
Bright MLS Chief Economist Lisa Sturtevant suggests we should expect a bumpy road to a more normal housing market in 2023.
"In the current housing market, it is a battle between the rational, financial calculus of homebuying and the instinctive, psychological side," Sturtevant said.
Impact on Buyers and Sellers
What does this news mean for buyers and sellers in the housing market?
For buyers, the recent increase in pending contracts could signal that there will be more competition for available homes in the coming months.
However, rising interest rates could pressure budgets, so it's essential to be realistic about what you can afford.
For sellers, the increase in pending contracts could be good news, as it suggests that there may be more demand for homes in the coming months.
Although as Sturtevant notes, it's important to be patient and realistic about pricing, as the market will likely remain in flux for some time.
Final Thoughts
The recent surge in pending contracts for home sales is a positive sign for the U.S. housing market. However, it's important to remember that plenty of uncertainty is still on the horizon, particularly with rising interest rates and a potentially bumpy road ahead.
Ultimately, buyers and sellers must remain flexible and adaptable as the housing market evolves in the coming months.
If you have questions about the Washington D.C., Maryland, or Northern Virginia housing market, don't hesitate to get in touch with us.
