Pending home sales fall in December, signaling tight inventory

Yahoo Finance's Ines Ferre breaks down the latest data on the real estate market as housing inventory remains low and home prices are high.

Video Transcript

EMILY MCCORMICK: Welcome back. Pending home sales dropped for a back-to-back month in December, as some key measures of housing market activity cooled at the end of 2021. Yahoo Finance's Ines Ferre is here with the details. And Ines, this drop in pending home sales came even before the jump in mortgage rates that we saw at the beginning of this year.

INES FERRE: That's right, that pending home sales index in December falling month over month by 3.8%. The estimate was for a fall of 0.4%. Year over year, the pending home sales index fell by 6.9%. And the estimate was for a fall of 4%. So this signifies extremely tight inventory. And the total housing inventory in December is down 8-- was down 18% from November and down 14.2% from one year ago.

Houses have been selling 10 days faster than a year ago, as home hunters are scrambling to try and buy a house as the mortgage rates have been ticking higher. You've got the 30-year fixed mortgage rate average at 3.55%. And it's only going higher from here. And these homebuyers are just trying to grab any type of inventory that they can amid tight, tight inventory.

ADAM SHAPIRO: Ines, it's understandable that people fear of missing out, especially with interest rates where they are. But you've spoken to first-time homebuyers and hunters. What are the trends, you know, personally? Is it a fear of missing out that's driving them? Is there something else? What are they telling you?

INES FERRE: Well, they're telling me that as the mortgage rates are ticking higher, they fear that they won't be able to make the monthly payments because those monthly payments will be going higher and higher with those mortgage rates. So they're able to afford less and less.

I spoke to one home hunter in Southern Texas, and I'm writing a piece about this. He's been looking for about a year now. He tells me that the houses that he was looking at a year ago are almost double in price now. He's looking at that range between the $100,000 and $200,000 level. Anything below $200,000 he's telling me are fixer uppers with very little land to them. And he feels a sense of urgency to try and buy something before the mortgage rates tick even higher, and he's priced out of the market.

And just to put a fine point on this, Zillow Research came out today with a data showing that-- the data showed that the total value of the US housing market in the US surged by almost $7 trillion in 2021 alone. That is the biggest growth in the residential market for any given year.

EMILY MCCORMICK: All right, Yahoo Finance's Ines Ferre, thank you so much for that breakdown.