Pending Home Sales Falter in January

Mark Vitner Wells Fargo

Pending home sales fell 2.8 percent in January, as low inventory and higher mortgage rates restrained potential homebuyers. The weaker reading suggests some downside risk to upcoming existing home sales.

Tight Inventory Holds Back Sales

Pending home sales, a forward-looking indicator based on contract signings, fell 2.8 percent in January. Sizable drops in the West and Midwest pulled the headline lower, while the Northeast and South reported modest increases.
The West was particularly weak, with purchase contracts falling a staggering 9.8 percent in January. Inventory in the region is exceptionally tight, however, and the weather has been rough.

Weak Start to 2017 for Pending Home Sales

Upward revisions to the prior month’s data reveal a slightly stronger trend but also hint that higher interest rates may have taken a heavier toll on sales.
The housing data are notoriously volatile during the winter and too much should not be made of this weak report. Mortgage rates have reversed part of their post-election spike recent and we expect sales to turn up this spring.

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Author

Mark Vitner

Wells Fargo

Mark Vitner is a managing director and senior economist at Wells Fargo, responsible for tracking U.S. and regional economic trends.

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