US pending home sales unexpectedly fell by 2.8% in January, according to the National Association of Realtors.
Buyer demand for housing is as strong as it’s been since the recession, the NAR said. However, “the significant shortage of listings last month along with deteriorating affordability as the result of higher home prices and mortgage rates kept many would-be buyers at bay,” said Lawrence Yun, the chief economist, in the release.
The S&P/Case-Shiller index of home prices shows that American houses are as expensive as they were before the Great Recession. While economists aren’t warning of another credit-induced bust, their concern is that limited inventories and higher interest rates may combine to raise the costs of home buying.
“Especially in the most expensive markets, prospective buyers will feel this squeeze to their budget and will likely have to come up with additional savings or compromise on home size or location,” Yun said.
Pending sales in December were revised lower to 0.8% from 1.6%. Economists had forecast that pending sales rose by 1% in January, according to Bloomberg.
Pending home sales serve as a forward indicator of future sales since they measure contract signings, but not closures, for single-family homes, condos, and co-ops.