Pending home sales decreased in February, marking the fourth straight month of depressed contract signings, according to the National Association of Realtors Pending Home Sales Index.
Pending home sales decreased 4.1 percent in February from the previous month and were down 5.4 percent from the same period last year, the data shows.
Experts attributed the slowdown of the forward-looking indicator used to determine how many home sales will be finalized in the coming weeks to the historic shortage of homes for sale.
Pending transactions diminished in February mainly due to the low number of homes for sale,” said Lawrence Yun, NAR’s chief economist. “Buyer demand is still intense, but it’s as simple as ‘one cannot buy what is not for sale.’”
Home prices continue to climb as inventory remains low, and the new challenge of increased mortgage rates is giving buyers another thing to grapple with, with mortgage payments increasing 28 percent year over year in February.
“It is still an extremely competitive market, but fast-changing conditions regarding affordability are ahead,” he said. “Consequently, homesellers cannot simply bump up prices in the upcoming months, but need to assess the changing market conditions to attract buyers.”
Rising inflation rates and gas prices continue to bite into the bottom line of potential buyers, pointed out Realtor.com chief economist George Ratiu.
“For buyers looking for a home, the higher price came at the same time as speeding inflation not only took more out of each paycheck but also pushed mortgage rates higher. The net effect, especially for first-time buyers, was a shrinking of their budgets, which only served to narrow available options,” Ratiu said in a statement.
Yun predicted mortgage rates to be at about 4.5 or 5 percent for the rest of 2022, and for 2022 to have a 7 percent reduction in home sales compared to 2021.
“Home prices themselves are still on solid ground,” he said. “They may rise around 5 percent by year’s end and we should see much softer gains in the second half of the year.”
Pending home sales were month over month in all regions except the Northeast, which rose 1.9 percent to 85 on the PHSI, with a 100 on the index representing the level of contract activity in 2021. The South saw pending sales decrease 4.4 percent to 127.2, while the Midwest saw a decrease of 6 percent to 99.7, and the West slid 5.4 percent to 90 on the index.