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9 Journal REPORT: YOY PENDING SALES DOWN 30% NATIONALLY According to the latest Pending Home Sales Index (PHSI) released by the Nation- al Association of Realtors, pending home sales increased 2.5% nationally, breaking a six-month streak of worsening numbers that began in May 2022. e index now stands at 76.9 points as of December 2022. Year-over-year, pending transactions dropped by 33.8%. An index number of 100 was benchmarked to home sales when the report was created in 2001. "is recent low point in home sales activ- ity is likely over," said Lawrence Yun, NAR's Chief Economist. "Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market." Of the four major geographical regions of the country, the West reported the largest growth of the group at 6.4% in December to an index of 58.6 but overall decreased by 37.5% year-over-year. e South saw the second-highest growth at 6.1% to an index of 94.1 but dropped year- over-year by 34.5%. However, the PHSI dropped in the other two regions of the country. In the Northeast, the PHSI dropped 6.5% from December to an index of 64.7%, a decline of 32.5% over December 2021. e Midwest index shrank by the least—or 0.3%—to an index of 77.6, a decline of 30.1% year-over-year. "e new normal for mortgage rates will likely be in the 5.5% to 6.5% range," Yun added. "Job gains will steadily become important in driving local home-sales markets. e South, in particular, is set to outperform the rest of the country, thanks primarily to better job market conditions in this part of the country compared to other regions." e PHSI is a leading indicator for the housing sector, based on pending sales of exist- ing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is final- ized within one or two months of signing. Realtor.com Economic Data Analyst Han- nah Jones responded to the report, saying: "December's contract signings reflected the housing market's ongoing struggle with afford- ability, as ample housing demand remained frozen by high prices and mortgage rates. ough mortgage rates fell as low as 6.27% in December, down 0.8 percentage points from November's high, home prices remained ele- vated, up 8.4% compared to the previous year." "To the delight of many, mortgage rates have continued to fall, dropping to levels not seen since September, offering buyers the opportunity to dip a toe back into the market. Even with December's retreat though, mortgage rates remained more than three per- centage points higher than the previous year, which means that the mortgage payment for a median-priced home was $730 higher than in December 2021. As a result, many buyers stuck to the sidelines, waiting for conditions to improve." "ough the market is still tipped in sellers' favor, many homeowners have reconsidered their plans to sell as fewer buyers competing means less potential upside," Jones concluded. "e ongoing lack of affordability has curbed buyer activity this winter, but lower interest rates and the coming spring homebuying season promise more opportunities for buyers and sellers alike." First American Deputy Chief Economist Odeta Kushi also commented on the report. "December 2022 pending-home sales improved for the first time since May 2022, in- creasing 2.5% from November but remaining 34% lower compared with one year ago," Kushi said. "Pending-home sales are a forward-look- ing indicator of home sales based on contract signings." "We now have multiple leading housing indicators that are pointing to modestly higher sales activity," Kushi continued. "Mortgage ap- plications have been trending higher alongside lower mortgage rates, pending-home sales are up, and home builder confidence increased in January." "Interested buyers are out there. From a financial perspective, the decision to buy a home comes down to a payment-to-paycheck calculation, and lower mortgage rates may help to reduce the mortgage payment while higher incomes can increase one's monthly paycheck." "Lower mortgage rates and a still strong labor market have helped to stabilize the housing market," Kushi concluded. "e market suffered a deep freeze in the winter months of 2022 but, if these dynamics persist, there is reason to believe that it will begin to thaw as the spring home-buying season approaches." Bright MLS Chief Economist Dr. Lisa Sturtevant had the following comments on today's Pending Home Sales data: "ere was a modest uptick in new pending sales in December, rising 2.5% compared to November. December's pending data suggests that the housing market may have bottomed out," Sturtevant said. "Buyer activity pulled back late last year as mortgage rates hit 20-year highs. But rates have fallen, and today's report is another sign that buyers are back. "Mortgage applications jumped last week as rates fell to their lowest level since Septem- ber. Both home showings and new contract activity has increased in many local markets with some agents reporting a return to bid- ding wars and multiple offers." "Predictions of a housing market collapse are way off base. ere are many prospective buyers who have come to accept the "new normal" of 6% mortgage rates and are tired of sitting out the opportunity to buy a home," Sturtevant concluded. "So, while the 2023 housing market will be slower than the market during 2021 or even the first half of 2022, there could be an unexpected first-quarter surge in buyer activity if rates stabilize or even come down further in the coming weeks."