by Affordability is still a concern, but lower mortgage rates could result in lower housing costs, particularly for first-time buyers on a budget
WASHINGTON — A report from the National Association of Realtors states that pending home sales rose 2.6% from November 2024 and 3.3% from October.
Offering a glimpse into the level of home sales under contract, the report said that year-over-year and month-over-month pending home sales rose in all four major regions, including the Northeast, Midwest, South and West.
The news bodes well for existing home sales in January as most closings occur within 30-60 days of a home going under contract, or an average of about 45 days. Thus, with closings occurring this month or soon after, the timing also could be good for retail sales events in the first quarter, including President’s Day.
“Homebuyer momentum is building,” said NAR Chief Economist Lawrence Yun. “The data shows the strongest performance of the year after accounting for seasonal factors, and the best performance in nearly three years, dating back to February 2023.”
By region, the activity was as follows:
+ In the Northeast, pending home sales rose 1.8% from November 2024 and the same amount from October.
+ In the Midwest, sales rose 2.2% from November 2024 and 1.3% from October.
+ In the South, they rose 3.3% from November 2024 and 2.4% from October.
+ In the West, they rose 2.4% from November 2024 and 9.2% from October.
The NAR’s most recent REALTORS Confidence Index survey also noted that 22% of NAR members expect an increase in buyer traffic over the next three months, up from 17% in October and down from 24% one year ago. In addition, 18% expect an increase in seller traffic, up from 16% in October but down from 22% in November 2024.
Of course, affordability remains an issue, as the NAR also recently reported that the median existing home price for all housing types in November was $409,200. This was up 1.2% from $404,400 in November 2024 and also the 29th consecutive month of year-over-year price increase.
However, Yun also noted lower mortgage rates and wage growth is increasing affordability for many buyers and also is encouraging more buyers to test the market.
“More inventory choices compared to last year are also attracting more buyers to the market,” he added.
In another related report, the NAR identified the Top 10 best markets for first-time homebuyers this year. The listing is based on factors such as the median listing price, the median income for 25-34 year olds and the share of income spent on a mortgage payment.
The top 10 markets are as follows:
- Rochester, New York
+ Median listing price: $139,900
+ 25-to-34-year-old median income: $48,617
+ Share of income spent on mortgage payment: 19.1%
2. Harrisburg, Pennsylvania
+ Median listing price: $151,999
+ 25-to-34-year-old median income: $51,285
+ Share of income spent on mortgage payment: 19.7%
3. Granite City, Illinois
+ Median listing price: $119,000
+ 25-to-34-year-old median income: $62,621
+ Share of income spent on mortgage payment: 12.6%
4. Birmingham, Alabama
+ Median listing price: $148,950
+ 25-to-34-year-old median income: $47,647
+ Share of income spent on mortgage payment: 20.8%
5. North Little Rock, Arkansas
+ Median listing price: $170,000
+ 25-to-34-year-old median income: $53,258
+ Share of income spent on mortgage payment: 21.2%
6. Syracuse, New York
+ Median listing price: $169,900
+ 25-to-34-year-old median income: $51,436
+ Share of income spent on mortgage payment: 22%
7. Baltimore, Maryland
+ Median listing price: $223,900
+ 25-to-34-year-old median income: $62,982
+ Share of income spent on mortgage payment: 23.6%
8. St. Louis Park, Minnesota
+ Median listing price: $375,000
+ 25-to-34-year-old median income: $98,036
+ Share of income spent on mortgage payment: 25.4%
9. Pittsburgh, Pennsylvania
+ Median listing price: $249,000
+ 25-to-34-year-old median income: $70,226
+ Share of income spent on mortgage payment: 23.6%
10. Garfield Heights, Ohio
+ Median listing price: $140,000
+ 25-to-34-year-old median income: $54,007
+ Share of income spent on mortgage payment: 17.2%
As it’s been recommended that housing not exceed 30% of one’s gross income, all these markets fall within a level of affordability for younger consumers. Lower mortgage rates will help improve prospects for buyers in these and other markets, thus leaving room in the budget for other expenses such as furniture.
As millennials continue to represent an increasing share of home buyers, it makes sense for retailers in these and other markets to market aggressively to these consumers, thus starting a relationship with them that could last for many years.
