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AR Chief Economist Lawrence Yun says a dip in pending home sales is not entirely unexpected, despite the housing market's upward momentum. The National Association of REALTORS' Pending Home Sales Index showed contract signings fell 5.5% month-over-month in December and were down 5% from last year, marking a weak end to a challenging year for home sales.

    Yun notes that economic data doesn't always move in a straight line, and winter typically sees slower home sales than the spring or summer seasons. He also attributes the slowdown to heavier-than-usual winter precipitation in many areas. However, buyer demand remains resilient, with mortgage rates hovering near 7% not significantly denting housing demand.

    Cash sales have grown to 28% of transactions in December, enabling some buyers to bypass mortgages altogether. Higher-priced areas in the West and Northeast regions may be more affected by higher mortgage rates, with contract signings falling 10.3% in the West and 8.1% in the Midwest. In contrast, more affordable regions like the South (down 2.7%) and Midwest (down 4.9%) saw less significant drops.

    Yun expects home sales to pick up as inventory opens up, with recent rises in listings (up 16% annually in December) likely leading to more sales over the coming months. Meanwhile, new-home sales are on the rise, with a 3.6% increase in December compared to November and a 6.7% gain from last year.

    New-home sales ended 2024 higher than in 2023, driven by limited resale inventory conditions. Builders are cautiously optimistic about the market for 2025, forecasting further gains in sales this year. With more supply available, builders are offering discounts and sales incentives to attract buyers, with 61% reporting using sales incentives like buying down mortgage rates.