US pending home sales rise more than expected in December

US pending home sales rose more than expected in December, according to data from the National Association of Realtors.

The NAR’s monthly index rose 1.6% to 109.0 from 107.3 in November and is now 0.3% above last December’s 108.7. Economists had been expecting the index to rise a more modest 1.1%.

The NAR’s chief economist, Lawrence Yun, said: “Pending sales rebounded last month as enough buyers fended off rising mortgage rates and alarmingly low inventory levels1 to sign a contract.

"The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs. Sales will struggle to build on last year's strong pace if inventory conditions don't improve."

The pending home sales index in the Northeast fell 1.6% to 96.4 in December and is now 1.2% below a year ago. In the Midwest, the index was down 0.8% to 102.7 and is now 3.4% lower than December 2015.

In the South, pending home sales rose 2.4% to 121.3 in December and are now 0.5% above last December, while sales in the West jumped 5% to 106.1, up 5% on a year ago.

Pantheon Macroeconomics said: "Pending sales have trended down in recent months, lagging the decline in mortgage applications before the election. We expect a modest relapse in January, but then the post-election surge in mortgage demand ought to lift activity back towards last spring's high. Whether this will then be sustained is a different matter, given the surge in mortgage rates. In the meantime, it's hard to be sure what the December pending sales index implies for January existing home sales."