U.S. Pending Home Sales Drop in December

(Reuters) – Contracts to buy U.S. previously owned homes fell in December, ending a four-month increase streak. Significant declines were observed in the pricier Northeast and West regions due to higher mortgage interest rates affecting affordability.

The National Association of Realtors (NAR) reported on Thursday that its Pending Home Sales Index, which tracks signed contracts, fell by 5.5% last month, dipping to 74.2 from a revised 78.5 in November. Economists surveyed by Reuters had predicted no change in December after a 1.6% increase in November.

Year-over-year, pending home sales declined by 5.0%. Regionally, all four areas saw monthly and annual declines. The Northeast experienced the largest monthly drop at 8.1%, followed by a 10.3% decrease in the West.

Lawrence Yun, the NAR’s chief economist, remarked, “After four straight months of gains in contract signings, one step back is not welcome news, but it is not entirely surprising.”

Mortgage rates for popular 30-year fixed-rate loans have risen above 7%, according to the Mortgage Bankers Association, which counteracts interest rate cuts from the Federal Reserve since September.

The 10-year U.S. Treasury note, a primary driver of home loan rates, has spiked following the Fed’s initial rate cut, as bond market investors express concerns over policies under President Donald Trump, such as tariffs and tax cuts, potentially leading to higher inflation.