Pending home sales fell less than expected in March, but it was the fifth month in a row of declines, according to the National Association of Realtors…(NAR)
- M-O-M: The Pending Home Sales Index fell 1.2% to 103.7 in March. An index of 100 is equal to the level of contract activity in 2001.
- Y-O-Y: Transactions sank 8.2% when compared to the same time one year ago.
NOTE: Economists had projected that sales would see a bigger drop of 1.6%.
The South continues to lead all regions by far even with a 0.9% month-over-month decline to an index of 125.8, this is down 9.5% from March 2021…
- The Midwest region fell 6.1% from February with an index of 94.7 followed by the West region with a slight decline to 89.8(-0.2%), and the Northeast was the only region that saw month-over-month growth at 4.0% to an index of 89.3.
Lawrence Yun, NAR Chief Economist, said rising rates are doing their job to slow down the market…
- “The falling contract signings are implying that multiple offers will soon dissipate and be replaced by much calmer and normalized market conditions…As it stands, the sudden large gains in mortgage rates have reduced the pool of eligible homebuyers, and that has consequently lowered buying activity.
REMINDER: For the first time in a few months the pending home sales data from NAR deviated from the Zonda Pending New Home Sales Index which was down 6.0% month-over-month in March…(Zonda).
Despite the jump in rates, this five-month slump has much more to do with the anemic inventory levels than a slowdown in homebuying because of affordability issues. It will be interesting to see what happens as inventory levels rise along with rates. It could lead to not only a decrease in bidding wars but also cause a reduction in prices. Home prices are still appreciating at a 20% annual clip yet most projections are for 10-15% y-o-y price growth meaning we could see not just a slowdown but an actual price pullback at the end of the year. With normalized inventory levels and possible 6% rates, this seems very possible.