Pending home sales in the U.S. unexpectedly showed a steep drop in the month of January, the National Association of Realtors revealed in a report on Wednesday.
NAR said its pending home sales index tumbled by 4.7 percent to 104.6 in January from a downwardly revised 109.8 in December. Economists had expected pending home sales to rise by 0.3 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.
With the unexpected decrease, the pending home sales index slumped to its lowest level since hitting 104.1 in October of 2014. The index is down by 3.8 percent year-over-year.
“There’s little doubt last month’s retreat in contract signings occurred because of woefully low supply levels and the sudden increase in mortgage rates,” said NAR chief economist Lawrence Yun.
He added, “With the cost of buying a home getting more expensive and not enough inventory, some prospective buyers are either waiting until listings increase come spring or now having to delay their search entirely to save up for a larger down payment.”
NAR said the number of available listings at the end of January was at an all-time low for the month and a startling 9.5 percent below a year ago.
The unexpected drop in pending home sales reflected decreases in all four regions of the country, with pending sales in the Northeast plummeting by 9.0 percent.
Pending home sales in the Midwest and South also slumped by 6.6 percent and 3.9 percent, respectively, while pending sales in the West fell by 1.2 percent.
Yun forecasts for existing home sales to be around 5.50 million in 2018, roughly unchanged from 5.51 million in 2017.
The national median existing home price is expected to increase around 2.7 percent this year after jumping by 5.8 percent last year.
On Monday, the Commerce Department released a separate report unexpectedly showing a steep drop in new home sales in the month of January.
The report said new home sales plunged by 7.8 percent to an annual rate of 593,000 in January after slumping by 7.6 percent to an upwardly revised 643,000 in December.
The continued decrease surprised economists, who had expected new home sales to jump by 3.2 percent to a rate of 645,000 from the 625,000 originally reported for the previous month.