As it turns out, you can’t afford what you can’t afford. Imagine that, right?

Pending home sales in the US dropped sharply in December, according to data released Thursday.

The figures suggest that in fact, fatalism about the long odds of lower rates isn’t sufficient on its own to boost sales. Put differently, just because you’ve accepted that financing costs aren’t likely to move lower anytime soon, doesn’t thereby mean you can pull the trigger on a home. It still depends on — you know — your capacity to afford the damn monthly payments.

As the figure shows, the near 6% decline was the largest since July, when the NAR’s gauge hit a record low. The measure’s one bad month away from re-testing those depths.

This is a bit of a let down. Recall that contract activity picked up four consecutive months prior to December’s drop, a run that pushed the index to the highest since February of 2023. That bump’s half gone now.

NAR Chief Economist Lawrence Yun tried to put things in perspective, where that means he exhorted market watchers not to catastrophize. “One step back is not welcome news, but it is not entirely surprising,” he said Thursday. “Economic data never moves in a straight line.”

No, it doesn’t. But I’d caution against the (in my view patently absurd) notion that the grudging acceptance of a higher-rate reality is a foundation for a durable recovery. The pool of buyers for whom acquiescence to 7-handle mortgage rates is by itself sufficient to catalyze contract signings is inherently limited. Those are buyers who could’ve pulled the trigger at any point during the past two years anyway, but didn’t, because they suspected rates might drop back into the fives, let’s call it. That’s hardly all prospective buyers. In fact, that’s a minority of sidelined demand, almost by definition.

Anyway, there’s always the rich. If all else fails, they’ll buy. Higher rates may not “significantly dent housing demand due to greater numbers of cash transactions,” Yun mused.