(Bloomberg) -- Contract signings to purchase U.S. previously owned homes unexpectedly slumped in December, depressed by fewer listings of properties and representing a blemish after a recent spate of positive housing-market news.

An index of pending home sales decreased 4.9% from the month prior, the largest decline since May 2010, according to data out Wednesday from the National Association of Realtors. The median forecast of economists surveyed by Bloomberg called for a 0.5% gain. Compared with December 2018, however, contract signings were up 6.8% on an unadjusted basis.

Key Insights

  • The monthly drop indicates housing demand is being thwarted by lean inventory that’s driving up asking prices and keeping prospective buyers from taking advantage of lower mortgage rates. A strong job market and income growth have also helped underpin home sales.
  • A report earlier today showed a gauge of loan applications to buy homes increased to an 11-year high in the week ended Jan. 24, suggesting firmer home sales at the start of 2020.
  • Pending home sales are often looked to as a leading indicator of existing-home purchases and a measure of the health of the housing market in the coming months.

Official’s View

“Due to the shortage of affordable homes, home sales growth will only rise by around 3%,” Lawrence Yun, chief economist at the NAR, said in a statement, adding that mortgage rates will probably hold below 4% for most of the year. “Home prices and even rents are increasing too rapidly, and more inventory would help correct the problem and slow price gains.”

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  • Contract signings fell in all U.S. regions, led by a 5.5% decline in the South and a 5.4% decrease in the West.
  • The pending home sales index stands at the lowest level since February.
  • Estimates from economists in the Bloomberg survey ranged from a 2% drop to a 1.5% gain.

To contact the reporter on this story: Max Reyes in New York at mreyes125@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Vince Golle, Jeff Kearns

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