Housing Market’s Blue Christmas: Pending Sales Slide Most Since 2001

If misery loves company, then prospective US home buyers and sellers should organize a little get-together. 

New data out Wednesday from the National Association of Realtors (NAR) showed US pending home sales fell in December to the lowest levels since the wary days of April 2020. Call it a Nobody’s Market, with both buyers and sellers facing unfavorable conditions. And it may only get worse. But don’t fret, Americans on both sides of the housing market equation: It’s not you, it’s geopolitical and economic forces far beyond your control. 

Bond Voyage

The 9% drop in contract signings from November to December bucked analysts’ expectations of a slight gain. Homes sat on the market for an average of 39 days, compared with 35 days in December 2024; sales fell across all regions, down 3% year over year. So who buys a home during the holidays anyway? Relatively few people. But the association adjusts for the market-slowing effects of Christmas cookie comas, and last month still marked the steepest dropoff for any December since 2001. 

The downturn comes at an interesting time. There are now 47% more sellers than buyers on the market, the largest chasm since 2013, according to a Redfin report published Tuesday. Theoretically, that would give buyers the advantage, were one to miss the forest for the trees. Total inventory fell 9% month over month to 1.18 million homes, continuing a trend of historic lows that has fueled an affordability crisis. 

Again, not quite a buyer’s market, not quite a seller’s market. Only making matters worse, the US housing market now finds itself on the tail of an around-the-world line of macroeconomic dominoes:

• Yields on ultra-long 40-year Japanese Government Bonds (JGB) remain elevated above 4% after reaching all-time highs on Tuesday as investors grew concerned about Prime Minister Sanae Takaichi’s tax-slashing plans ahead of a February snap election. And what happens in Japanese bond markets doesn’t stay in Japanese bond markets: JGBs act as an indicator for US Treasury yields, which can act as an indicator for monetary policy …
• … Which means the continued wind-down of US interest rates that was expected this year now faces new headwinds, which means mortgage rates could climb again. Which means, yes, before buyers could even get excited about mortgage rates falling to near 6%, they might rebound higher. 

How Greenland Was My Valley: Buyers did have one win on Wednesday. After President Trump announced the Greenland deal framework in Davos, US Treasury yields, which had hit recent highs earlier in the week, pulled back amid a broader reversal of the “Sell America” trade. The president spent much of the rest of his time in Davos talking about America’s housing crisis, vowing that the US will not become a “nation of renters,” while making his ban on institutional home buyers official via executive order. Perhaps maintaining global stability could be the third leg of an affordability agenda stool.