The Pending Home Sales Index dropped 4.3% to 101.7 for December, according to a National Association of Realtors (NAR) statement released today. After November's revised 1.6% rise to 2010 levels, analysts had expected a 0.3% decrease.
The index is based on contract signings (with sales usually finalized one or two months after) and is benchmarked to 2001 contract activity. (An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined by the association.)
According to NAR Chief Economist Lawrence Yun, growth is currently limited by housing shortages in some areas. Homes costing less than $100,000 are in especially tight supply, limiting the purchase options for first-time buyers, he said.
Yun points out that, on a year-over-year basis, contract activity continued to rise for the 20th straight month. Compared to December 2011, this newest index reading represents a 6.9% gain.
On a regional level, the index has risen the most (14.4%) in the Midwest in the past year. The South's index improved 10.1% and the Northeast bumped up 8.4%. The West, where supply has been especially low, dropped 5.3% since December 2011.
Looking ahead, Yun expects 2013 to mirror 2012's 9% increase in existing home sales.