December pending home sales up 2.5%

Homes in a subdivision in Atlanta, Georgia, U.S., on Sunday, Nov. 13, 2022. Redfin Corp. is shuttering its iBuying business and laying off workers for the second time in almost five months, as the likelihood of a prolonged U.S. housing slowdown continues to ripple through the industry. MUST CREDIT: Bloomberg photo by Elijah Nouvelage

U.S. pending home sales unexpectedly rose in December for the first time in seven months, wrapping up an otherwise poor year for a housing market battered by a doubling of mortgage rates.

The National Association of Realtors' index of contract signings to purchase previously owned homes increased 2.5% last month to 76.9, according to a release Friday. The median estimate in a Bloomberg survey of economists called for a 1% decline.

Throughout 2022, contract signings decreased more than 20% as demand weakened on the heels of aggressive interest-rate increases by the Federal Reserve, lifting borrowing costs. Consumers' views of home-buying conditions are hovering near historic lows, based on University of Michigan survey data.

Other recent data, however, has shown some signs that demand is stabilizing as borrowing costs and prices retreat.

"This recent low point in home sales activity is likely over," Lawrence Yun, the Realtor association's chief economist, said in a statement. "Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market."

Pending sales rose in two of four regions in the month, led by a 6.4% gain in the West and a 6.1% increase in the South.

Pending home sales are often looked to as a leading indicator of existing-home purchases as properties typically go under contract a month or two before being sold. The index is based on a sample that covers about 40% of multiple listing services' monthly data.

Information for this report was contributed by Chris Middleton of Bloomberg News (WPNS).