2020.01.2914:17:00UTC+00U.S. Pending Home Sales Unexpectedly Pull Back Sharply In December

Pending home sales in the U.S. unexpectedly showed a sharp pullback in the month of December, according to a report released by the National Association of Realtors on Wednesday.

NAR said its pending home sales index plunged by 4.9 percent in December after jumping by 1.2 percent in November. Economists had expected pending home sales to rise 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.

The unexpected nosedive in pending home sales in December reflected notable decreases in pending sales in all four regions of the country.

Pending home sales slumped by 3.6 percent in the Midwest and by 4.0 percent in the Northeast, while pending sales in the West and South tumbled by 5.4 percent and 5.5 percent, respectively.

Despite the substantial monthly decrease, NAR noted that pending home sales in December were up by 4.6 percent compared to the same month a year ago.

NAR chief economist Lawrence Yun said low mortgage rates and strong job growth are promising for the housing market 2020 but cautioned that low inventory remains a significant longer-term concern.

"The state of housing in 2020 will depend on whether home builders bring more affordable homes to the market," Yun said. "Home prices and even rents are increasing too rapidly, and more inventory would help correct the problem and slow price gains."

On Monday, the Commerce Department released a separate report unexpectedly showing a modest decrease in new home sales in the month of December.

The report said new home sales fell by 0.4 percent to an annual rate of 694,000 in December from a downwardly revised 697,000 in November.

The drop surprised economists, who had expected new home sales to surge up by 1.5 percent to an annual rate of 730,000 in December from the 719,000 originally reported for the previous month.

Revised data also showed new home sales slumped by 1.1 percent in November compared to the previously reported 1.3 percent jump.