WASHINGTON, Jan 21 (Reuters) – Contracts to purchase previously owned U.S. homes unexpectedly fell in December, hitting a five-month low, likely as worries over the labor market and a persistent shortage of entry-level houses offset lower mortgage rates.
The pending home sales index plunged 9.3% last month to 71.8, the lowest level since July, the National Association of Realtors said on Wednesday. Economists polled by Reuters had forecast contracts, which become sales after a month or two, advancing 0.4%. Contracts fell in all four regions.
Pending home sales dropped 3.0% from a year earlier.
“After several months of encouraging signs in pending contracts and closed sales, the December new contract figures have dampened the short-term outlook,” said Lawrence Yun, the NAR’s chief economist.
Yun noted that inventory was low in December, with about 1.18 million previously owned homes on the market, which he said matched the “lowest inventory level of 2025.”
“Consumers prefer seeing abundant inventory before making the major decision of purchasing a home,” said Yun. “So, the decline in pending home sales could be a result of dampened consumer enthusiasm about buying a home when there are so few options listed for sale.”
Though there is an oversupply of new homes on the market, the inventory of previously owned houses has remained low because most homeowners have mortgage rates well below 5%, reducing the incentive to list their properties. Slowing house price growth is also discouraging some potential sellers.
President Donald Trump on Tuesday signed an executive order restricting institutional investors from buying single-family homes. The Trump administration is also purchasing mortgage-backed securities, which have resulted in mortgage rates falling in recent weeks.
The decline could, however, be limited by renewed trade tensions between the U.S. and Europe after Trump threatened tariffs against nations that oppose his bid to acquire Greenland. The tensions helped to raise the yield on the 10-year U.S. Treasury note, which mortgage rates track.
A sharp slowdown in job growth because of economic uncertainty is also hampering home sales.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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