Pending home sales down for fifth straight month

According to the last Pending Home Sales Index (PHSI) According to the National Association of Realtors (NAR), pending home sales fell 4.1% month-over-month in March, marking the fifth consecutive month of declining transactions. Year-over-year, pending home sales fell 8.2% in March, marking the tenth consecutive month of annual decline.

“The decline in contract signings implies that multiple offers will soon dissipate and be replaced by much calmer and normalized market conditions,” said Lawrence Yun, Chief Economist of NAR. “As it stands, sudden and large increases in mortgage rates have reduced the pool of eligible buyers, which in turn has reduced buying activity.”

“The aspiration to buy a home remains, but affordability has become a major limiting factor.”

In addition, Yun expects the 30-year fixed mortgage rate to reach 5.3% by the fourth quarter, mortgage rates to average 4.9% in 2022 and 5.4% by 2023. He also expects inflation to hit 8.2% in 2022, although it will start to moderate to 5.5% in the second half of this year.

In March 2022, rising mortgage rates and sustained price appreciation led to a 31% year-over-year increase in mortgage payments.

“Overall existing home sales this year appear to be down 9% from last year’s blistering pace,” Yun said. “Home prices are not likely to decline nationally, but price gains will steadily slow so that the median home price in 2022 is likely to rise 8% from last year.”

Tenants have also seen their monthly payments increase, prompting more tenants to explore home ownership, Yun said.

“Rapidly rising rents will encourage tenants to consider buying a home, although higher mortgage rates present challenges,” Yun said. “Strong rent growth will nevertheless lead to a boom in multi-family housing starts, with growth of more than 20% this year.”

Yun predicts that the unemployment rate will average 3.7% in 2022 and estimates that gross domestic product will increase by 2.8%.

With rising mortgage rates, Yun added that single-family home builders will be more cautious, despite the current tight inventory conditions, saying “I expect this to translate into an increase in construction of less than 5 %”.

Month-over-month, the North East PHSI rose 4.0% to 89.3, translating to a 9.2% year-over-year decline. In the Midwest, the index fell 6.1% last month to 94.7, down 4.8% from a year ago.

In the South, pending home sales transactions fell 0.9% to 125.8, down 9.5% from a year ago. The index in the West fell 0.2% in March to 89.8, down 8.4% from a year earlier.

“The spring real estate market got off to an unpredictable start, reflecting weather across much of the country that alternated between heat waves and ice storms,” noted Realtor.com Director of Economic Research George Ratiu. . “Markets remain clearly tilted in favor of sellers due to the shortage of homes and the large number of buyers still determined to lock in predictable monthly payments as a hedge against inflation. the availability of credit through interest rates For consumers, increases in credit card, auto and mortgage rates compound the much higher prices they pay for gasoline, cars, clothing, food and services. At the end of each month, “Americans find that there is less money left on each paycheck. We can expect these factors to lead to fewer transactions in the coming months as many early buyers end up off the market.”