Home buyers are coming back to the market, possibly due to lower mortgage rates.
Pending home sales, a measure of signed contracts to buy existing homes, increased 4.6 percent in January compared with December, according to a monthly survey from the National Association of Realtors. Contracts, however were still 2.3 percent lower compared with a year ago. This marks the thirteenth straight month of annual declines.
"A change in Federal Reserve policy and the reopening of the government were very beneficial to the market," said Lawrence Yun, chief economist for the NAR. "Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers."
The average rate on the 30-year fixed mortgage jumped over 5 percent at the start of November but then began falling in December. In January, when these contracts were signed, it hit a low of 4.43 percent, according to Mortgage News Daily. That likely helped buyers not only afford homes but feel better about the overall investment.
Regionally, pending sales in the Northeast rose 1.6 percent monthly and were 7.6 percent above a year ago. In the Midwest, sales rose 2.8 percent monthly but were 0.3 percent lower annually. In the South sales jumped 8.9 percent monthly and were 3.1 percent lower annually. Sales in the West increased 0.3 percent monthly and fell 10.1 percent compared with a year ago.
Closed sales of existing homes fell in January, but those represent contracts signed in November and December, when rates were still falling but were higher than they are now. Some are now reporting increased demand, thanks to lower rates, but there is still a hesitancy in the overall market.
"The buyers and the sellers are in this dance right now where it's a little harder to put deals together because nobody's certain where the market is going to land," said Glenn Kelman, CEO of Redfin in an interview on CNBC's Power Lunch. "It's a little bit better than it was in the fourth quarter, we're seeing stronger buyer demand, but it's not as if people are willing to pay any price to get a home, which is what we saw at the beginning of 2018 and for the past four years before that."