According to the National Association of REALTORS®’ (NAR) latest report, pending home sales fell 7.7% in April. All four U.S. regions posted month-over-month and year-over-year decreases, and pending contract transactions were also down 7.4%.
“The impact of escalating interest rates throughout April dampened homebuying, even with more inventory in the market,” said NAR Chief Economist Lawrence Yun in a statement. “But the Federal Reserve’s anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply.”
NAR’s forward-looking index of pending home sales decreased to 72.3 in April. In the Northeast, the index fell 3.5% from March to 62.9, and the Midwest dropped 9.5% from March, down to 70.7—lower year-over-year by 3.1% and 8.7%, respectively.
Drilling further, the pending sales index in the South lowered 7.6% to 88.6 in April and the West dropped 8.5% in April, all the way to 55.9, each down 8.2% and 7.3% year-over-year.
Additionally, while housing supply has been the most pressing market challenge facing buyers, this aspect is finally beginning to indicate change, as prices are now the biggest threat to hopeful homeowners on the market.
“Home sales activity had been surprisingly resilient despite mortgage rates stuck near 7%,” said Bright MLS Chief Economist Dr. Lisa Sturtevant in a statement. “For the past couple of years, the primary constraint on the housing market has been a lack of supply. Now, however, supply is increasing, but for many buyers, high home prices and mortgage rates are going to be the biggest challenge this summer.” A recent survey conducted by Bright MLS finds that nearly three quarters of real estate agents have had a buyer pause their home search, and the primary reasons for a buyer to stop looking are high mortgage rates and high home prices.
Sturtevant continued, explaining that “while higher-income homebuyers may not be deterred, a pullback of first-time and more moderate-income buyers over the next couple of months will lead to depressed market activity. The median home price, however, could continue to rise as a larger share of home sales this summer are at the upper end of the market.”
Dr. Selma Hepp, chief economist at CoreLogic, believes “we are witnessing an important shift in home-buying sentiment,” as this time last year, potential homebuyers had a home-buying mentality despite higher rates and low inventory across the board.
“With little expectation of interest rates going down in the near term, the mindset today is to wait and see. Households are taking the headlines in and see rising insurance costs and climate change disruptions contributing to the affordability challenges, and that is also having a negative impact on sentiment,” she said.
