WASHINGTON – The pace of Americans signing contracts to buy homes fell 4.7 percent in January to its lowest level in more than three years, due to a lack of homes for sale, higher prices and rising mortgage rates.
The National Association of Realtors said Wednesday that its index of pending sales sank to 104.6 from 109.8 in December. That marks the index's lowest reading since October of 2014. Pending sales are a barometer of future purchases. Final sales typically follow a month or two after a signed contract.
The index's sharp decline comes as home affordability has become increasingly problematic for a growing number of would-be buyers. The recent jump in mortgage rates has increased their monthly costs, limiting how much they can pay for a house. Average home price increases are eclipsing wage growth. And the shrinking number of homes for sale is leaving more of these potential buyers dismayed at not being able to find a property that works for them.
Standard & Poor's said Tuesday that U.S. home prices in 2017 as measured by the Case-Shiller increased at the fastest 12-month pace in more than three years, easily surpassing most people's income gains.
Last week, mortgage buyer Freddie Mac said that the average rate on 30-year fixed-rate mortgages rose to 4.40 percent. That's the highest rates have been since April 2014 and the seventh straight weekly increase, another reason many sellers are opting to hold on to their properties and lower interest rates.
The number of signed contracts fell in every region, including a 9 percent drop in the Northeast and a 6.6 percent decline in the Midwest. Pending sales fell by 3.9 percent in the South and 1.2 percent in the West.