Following strength in existing home sales and weakness in new home sales, pending home sales greatly disappointed. Against expectations of a 0.5% jump, pending home sales tumbled 2.5% in January – the biggest drop since Dec 2013. This is the 9th monthly miss in a row. While the weather was blamed a little, NAR’s Larry Yun pins the absence of first-time buyers on high prices driven b y “cash buyers and investors.”

The 9th monthly miss in pending home sales with the biggest monthly drop since Dec 2013.

The regional breakdown shows the plunge was widespread:

The PHSI in the Northeast declined 3.2 percent to 94.5 in January, but is still 10.9 percent above a year ago. In the Midwest the index fell 4.9 percent to 101.1 in January, but is still 1.4 percent above January 2015.

Pending home sales in the South inched up 0.3 percent to an index of 121.1 in January but remain 1.3 percent lower than last January. The index in the West decreased 4.5 percent in January to 96.5, but is still 0.4 percent above a year ago.

As NAR explains,

The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 2.5 percent to 106.0 in January from an upwardly revised 108.7 in December but is still 1.4 percent above January 2015 (104.5). Although the index has increased year-over-year for 17 consecutive months, last month’s annual gain was the second smallest (September 2014 at 1.2 percent) during the timeframe.

Lawrence Yun, NAR chief economist, says a myriad of reasons likely contributed to January contract signings subsiding in most of the country. “While January’s blizzard possibly caused some of the pullback in the Northeast, the recent acceleration in home prices and minimal inventory throughout the country appears to be the primary obstacle holding back would-be buyers,” he said. “Additionally, some buyers could be waiting for a hike in listings come springtime.”

Existing-home sales increased last month and were considerably higher than the start of 20152, but price growth quickened to 8.2 percent – the largest annual gain since April 2015 (8.5 percent).

While the hope is that appreciating home values will start to entice more homeowners to sell, Yun says supply and affordability conditions won’t meaningfully improve until homebuilders start ramping up production – especially of homes at lower price points.

And do not expect first-time home-buyers rto save the ‘recovery’…

“First-time buyers in high demand areas continue to encounter instances where their offer is trumped by cash buyers and investors”

“Without a much-needed boost in new and existing-homes for sale in their price range, their path to homeownership will remain an uphill climb.“

Charts: Bloomberg