Pending Home Sales Slump

(Illustration courtesy of the National Association of Realtors)

Pending home sales fell 7.7% in April, the National Association of Realtors reported yesterday.

All four U.S. regions registered month-over-month and year-over-year decreases, the NAR Pending Home Sales Index report said. The index, a forward-looking indicator of home sales based on contract signings, decreased to 72.3 in April. Year-over-year, pending transactions were down 7.4%.

“The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market,” NAR Chief Economist Lawrence Yun said.

Yun noted the Federal Reserve’s anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply.

First American Deputy Chief Economist Odeta Kushi said household income remains strong, “yet mortgage rates remain elevated in the Fed’s ‘higher-for-longer’ interest rate environment,” she said. “If the Fed cuts rates later this year, all else held equal, it should result in lower mortgage rates, boosting affordability and bringing buyers off the sidelines.”

Regional Breakdown

The Northeast Pending Home Sales Index fell 3.5% from last month to 62.9, a decline of 3.1% from April 2023. The Midwest index dropped 9.5% to 70.7 in April, down 8.7% from one year ago.

The South Pending Home Sales Index lowered 7.6% to 88.6 in April, dropping 8.2% from the prior year. The West index decreased 8.5% in April to 55.9, down 7.3% from April 2023.

“Home prices are hitting record highs, but the pace of gains should decelerate with more supply,” Yun said. “However, the prospect of measurable home price declines appears minimal. The few markets experiencing price declines will be viewed as second-chance opportunities for buyers to enter the market if those regions continue to add jobs.”