U.S. Pending Home Sales Unexpectedly Tumble 3.7% In December

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Partly reflecting fewer homes available for sale and a slight acceleration in prices, the National Association of Realtors released a report on Thursday unexpectedly showing a sharp drop in U.S. pending home sales in the month of December.

NAR said its pending home sales index tumbled 3.7 percent to 100.7 in December rising 0.6 percent to a slightly downwardly revised 104.6 in November.

The steep drop in pending home sales came as a surprise to economists, who had expected the index to climb by 0.5 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

With the unexpected decrease, the pending home sales index fell to its lowest level since hitting 97.9 in April of last year.

Despite the monthly decrease, NAR noted that pending home sales in December were up by 6.1 percent from a year ago, reflecting the biggest year-over-year increase since June of 2013.

Lawrence Yun, NAR chief economist, said, "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."

"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," he added.

The unexpected decrease in pending home sales in December was partly due to a steep drop in the Northeast, where pending sales plunged by 7.5 percent.

Pending home sales in the Midwest also slumped by 4.6 percent in December, while pending sales in the Midwest and South fell by 2.8 percent and 2.6 percent, respectively.

Looking ahead, NAR forecast total existing home sales of around 5.26 million in 2015, reflecting an increase of 6.6 percent from 2014.

The national median existing home price for the year is also expected to increase between 4 and 5 percent, the group said.

Last Friday, NAR released a separate report showing that existing home sales rose roughly in line with economist estimates in the month of December.

The report said existing home sales rose 2.4 percent to an annual rate of 5.04 million in December after tumbling 6.3 percent to a downwardly revised 4.92 million in November. Economists had expected existing home sales to climb to an annual rate of 5.05 million.

With the monthly increase, existing home sales were up by 3.5 percent compared to a year ago, reflecting the third straight month of year-over-year growth.

However, NAR noted that there were 4.93 million sales for all of 2014, reflecting a 3.1 percent decline from 5.09 million in 2013. The decrease marked the first drop since 2010.

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