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Pending home sales took an unexpected downward turn in December but still managed to finish 2014 ahead of year-ago numbers, according to a report from a major housing group.
The National Association of Realtors (NAR) said Thursday that its Pending Home Sales Index (PHSI) declined 3.7 percent last month to a reading of 100.7. Economists expected a 0.9 percent gain.
Compared to December 2013, contract signings were up 6.1 percent, marking a fourth straight month of annual improvement and the highest year-over-year gain since June 2013.
Lawrence Yun, chief economist for NAR, blamed the monthly downswing on a drop in for-sale homes and an acceleration in price growth.
"Total inventory fell in December for the first time in 16 months, resulting in fewer choices for buyers and a modest uptick in price growth in markets throughout the country," Yun said. "With interest rates at lows not seen since early 2013, the strength in existing-sales in upcoming months will largely depend on the willingness of current homeowners to realize their equity gains from the past couple years and trade up."
With jobs and consumer confidence on the rise and barriers to homeownership coming down—particularly for first-time homebuyers—Yun said he expects more demand in the months ahead. Taking an early guess, NAR projects total existing-home sales in 2015 will be around 5.26 million, an increase of 6.6 percent over last year.
Pending sales were down month-over-month in all major regions, with the Northeast posting the biggest decline at 7.5 percent. That was followed by the West (down 4.6 percent), the Midwest (2.8 percent), and the South (2.6 percent).
Contract signings were up in all regions compared to the same month in 2013.
