Pending home sales were basically flat in December, rising just 0.1% compared with November but up 4.2% compared with December 2014, according to the National Association of Realtors (NAR).
The slight increase was due to a jump in existing-home sales in the Northeast, which saw activity increase 6.1% compared with the previous month.
As a result of the slight increase, the index moved upward to a score of 106.8 in December compared with a downwardly revised 106.7 in November.
Although December’s increase was very small, the index has increased year over year for 16 consecutive months, NAR reports.
“Warmer-than-average weather and more favorable inventory conditions compared to other parts of the country encouraged more households in the Northeast to make the decision to buy last month,” explains Lawrence Yun, chief economist for NAR, in a statement. “Overall, while sustained job creation is spurring more activity compared to a year ago, the ability to find available homes in affordable price ranges is difficult for buyers in many job-creating areas. With home building still grossly inadequate, steady price appreciation and tight supply conditions aren’t going away anytime soon.”
According to Yun, although healthy labor market conditions will persuade more households to buy, it’s possible overall demand could be somewhat curtailed in coming months. The stock market’s sizeable losses since the start of the year and the effect that slowing manufacturing activity is having in some areas – especially in the energy sector – could cause some to hold off on buying.
“The silver lining from the market turmoil in recent weeks is the fact that mortgage rates have slightly declined,” Yun adds. “Buyers looking to close on a home before the spring buying season begins may be rewarded with a mortgage rate at or below four percent.”
Currently, NAR is forecasting that existing-home sales will reach an annual rate of 5.34 million this year – an increase of 1.5% compared with 2015.
Existing-home sales increased 6.5% in 2015 compared with 2014.
The firm is forecasting that home prices will increase between 4% and 5% this year.
In 2015, home prices rose about 6.8%, according to the firm’s data.