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The numbers: Pending home sales plunged in April as buyers felt the effects of an expensive housing market.
With home prices and mortgage rates rising, buyers seem to be pulling back on signing contracts on homes for sale.
Pending home sales fell 7.7% in April from the previous month, according to the monthly index released Thursday by the National Association of Realtors.
Pending home sales reflect transactions where the contract has been signed for the resale of a home, but the sale has not yet closed. Economists view it as an indicator of the direction of sales of existing homes in subsequent months.
Sales activity is at the lowest level since April 2020.
The sales pace fell short of expectations on Wall Street. Economists were expecting pending home sales to fall 0.4% in April.
Transactions were down 7.4% from a year ago.
Big picture: The housing market is facing a double whammy in the form of higher mortgage rates and a scarcity of homes for sale.
Until more home listings come online, house hunters face steep prices for homes, on top of elevated mortgage rates. The national median mortgage payment was $2,256 in April, up 6.8% from a year ago, according to the Mortgage Bankers Association.
What the NAR said: “The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market,” Lawrence Yun, chief economist at the National Association of Realtors, said in a statement.
“The Federal Reserve’s anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply,” he added.
What they’re saying: The pending home sales index fell to the “lowest level since April 2020,” Hannah Jones, senior economic research analyst at Realtor.com, said in a statement.
“Pending home sales tend to lead existing home sales by roughly one to two months and are a good indicator of market conditions. Mortgage rates hovered around 6.8% in March, allowing for an uptick in contract signings,” she added. “However, mortgage rates climbed from 6.8% to 7.2% in April, dampening buyer enthusiasm.”
Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch publisher Dow Jones is also a subsidiary of News Corp.
“The bigger story here is that pending home sales have been running much stronger than implied by the rock-bottom levels of mortgage demand, and a correction was overdue,” Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, wrote in a note.
“A significant fall in existing home sales in May now seems like a safe bet, given the usual short lags between pending and existing sales,” he added.
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