The frozen housing market may be starting to thaw

Pending home sales jumped 8.3% in December, above expectations, and mortgage rates have continued to ease.

• The US housing market is showing renewed signs of life as 2024 begins.
• NAR data showed December pending home sales jumped 8.3% from the prior month.
• That beat expectations and marked the biggest jump since June 2020.

The US housing market has been largely frozen for the last two years, but it's starting to show signs of a thaw as sales activity and mortgage applications pick up, and mortgage rates ease. 

On Friday, the National Association of Realtors reported pending home sales climbed 8.3% in December from November, hitting 77.3.

That marked the biggest increase since June 2020, a month that saw a 14.9% spike, and beat out consensus projections of a modest 2% growth.

The reading measures how many contracts have been signed for the purchase of an existing home, and it's often used as a leading indicator for existing-home sales.

"Consensus projections always seemed on the low side given what we've seen with purchase mortgage applications, another leading indicator of sales activity," First American deputy chief economist Odeta Kushi said in a note.

"Average mortgage applications in December increased nearly 8% compared with the previous month, and so far in the month of January, they have increased approximately 10% compared with December," she continued, adding that the data imply existing-home sales should accelerate.

Mortgage rates for the most popular home loan, meanwhile, have been easing from multi-decade highs around 8% notched last October. This week, the rate on the 30-year fixed mortgage was 6.69%, according to Freddie Mac. 

The NAR also reported that it anticipates a 13% increase in existing-home sales for 2024, which would bring the total to 4.62 million units. The economists expect another 15.8% jump in 2025 to 5.35 million.

The NAR forecasts the Federal Reserve to cut interest rates four times this year, and that mortgage rates will hover between 6% and 7% through 2025.

"The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices," said Lawrence Yun, the chief economist for the NAR. "Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand."