Pending-home sales fell for the fourth month in a row in February, as low housing inventory and rising home prices and interest rates continued to crimp purchasing ability, the National Association of REALTORS® reported, citing its Pending Home Sales Index.
Pending sales, in which the contract has been signed but the transaction has not closed, fell 4.1% on a monthly basis and 5.4% on an annual one, according to a press release.
“Buyer demand is still intense, but it’s as simple as ‘one cannot buy what is not for sale,’” NAR chief economist Lawrence Yun said. “Fast-changing conditions regarding affordability are ahead. Consequently, home sellers cannot simply bump up prices in the upcoming months, but need to assess the changing market conditions to attract buyers.”
Higher mortgage rates and continued rising home prices have combined to drive up mortgage payments by 28% over the last year, NAR said. Yun expects mortgage rates to be about 4.5% to 5% for the rest of 2022 and home sales to fall 7% relative to 2021.
“Home prices themselves are still on solid ground,” Yun said. “They may rise around 5% by year’s end, and we should see much softer gains in the second half of the year.”
Three of the four geographic regions saw decreases in contract activity from the previous month, with only the Northeast seeing an increase, with a 1.9% rise. Sales fell 6% in the Midwest, 5.4% in the West and 4.4% in the South.
“We’re seeing some softening in the market, as expected with limited inventory, double-digit house price growth and rising mortgage rates, but context is key,” First American deputy chief economist Odeta Kushi said. “While purchase demand is below 2020 and 2021 levels, it’s still above 2019 levels, which was our strongest year in a decade at the time.”