December contract signings dropped as tight inventory kept buyers on the sidelines
US pending home sales fell to a five‑month low in December, undercutting hopes that lower mortgage rates alone would revive housing demand.
The National Association of Realtors’ Pending Home Sales Index dropped 9.3% from November and 3.0% from a year earlier, to 71.8, with signings down in all four major regions.
Sharp December pullback after autumn rebound
The December setback came after several months of improving contract activity and a solid gain in November, when pending deals rose 3.3% month over month.
Existing home sales also finished the year on a stronger note, rising 5.1% in December as closed transactions caught up with earlier signings.
“The housing sector is not out of the woods yet,” Lawrence Yun, NAR chief economist, said.
“After several months of encouraging signs in pending contracts and closed sales, the December new contract figures have dampened the short-term outlook.”
Yun said interpreting winter data required caution. “Even after accounting for typical seasonal patterns, interpreting in-person home search activity in the winter – especially in December – can be tricky due to public holidays, people taking time off, and wintry weather conditions,” he said.
“We’ll be watching the data in the coming months to determine whether the soft contract signings were a one-month aberration or the start of an underlying trend.”
Inventory pressures and buyer psychology
NAR data showed 1.18 million homes on the market in December, matching what Yun called the “lowest inventory level of 2025” and leaving many buyers with few options.
“Consumers prefer seeing abundant inventory before making the major decision of purchasing a home,” he said. “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.”
Median time on market rose to 39 days, up from 36 days in November and 35 days a year earlier, according to NAR’s December REALTORS Confidence Index.
First‑time buyers accounted for 29% of sales, down from 31% in December 2024, while all‑cash transactions inched up to 28% and investor or second‑home buyers represented 18% of deals.
Signals for 2026 buyer and seller traffic
Forward‑looking sentiment among agents improved modestly. NAR reported that 31% of its members expected an increase in buyer traffic over the next three months, up from 22% in November, while 28% anticipated more seller traffic, compared with 18% a month earlier.
Analysts urged mortgage and real estate professionals to treat the December slump cautiously rather than as a definitive turn.
Lisa Sturtevant, chief economist at Bright MLS, pointed to the push and pull between rates and economic anxiety. “Lower mortgage rates are helping to improve affordability in the year ahead, but economic uncertainty is holding some prospective buyers back,” she said.
“Buyers looking to get into the market this year will generally find more inventory and greater opportunities to negotiate on price and concessions. Sellers wanting a quick sale will need to price appropriately to entice economically anxious buyers.”
Economists also stressed that 2026 housing activity would likely hinge less on big rate moves and more on household‑level decisions that drive underlying demand.
“For now, we remain cautiously optimistic that the recent pullback in rates and cooling price growth will support a more constructive year ahead for home buyers – driven more by ‘life happens’ events such as job changes, marriages, and growing families than by further declines in mortgage rates,” said Sam Williamson, senior economist at First American.
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