Pending home sales continue to slide, dropping 4.1% in February to mark the fourth consecutive month of losses, according to data released by the National Association of Realtors on Friday.
The Pending Home Sales Index (PHSI) fell to 104.9 in February from 109.5 in January. February’s reading is 5.4% lower than a year ago and marks the ninth consecutive month of year-over-year declines.
An index of 100 is equal to the level of contract activity in 2001.
“Pending transactions diminished in February mainly due to the low number of homes for sale,” Lawrence Yun, NAR’s chief economist said in a statement. “Buyer demand is still intense, but it’s as simple as ‘one cannot buy what is not for sale.’”
Yun also blamed climbing home prices and rising interest rates. As of February, the combination of these two factors, has led to a 28% year-over-year increase in mortgage payments.
“It is still an extremely competitive market, but fast-changing conditions regarding affordability are ahead,” Yun said in a statement. “Consequently, home sellers cannot simply bump up prices in the upcoming months, but need to assess the changing market conditions to attract buyers. The surge in home prices combined with rising mortgage rates can easily translate to another $200 to $300 in mortgage payments per month, which is a major strain for many families already on tight budgets.”
According to NAR, Yun expects mortgage rates to be about 4.5% to 5% for the remainder of the year and that there will be a 7% reduction in home sales in 2022 compared to 2021.
“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 in a statement. “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.”
The NAR’s hottest housing markets data for February showed that out of the 40 largest metropolitan areas, Orlando-Kissimmee-Sanford, Fla.; Miami-Ft. Lauderdale, Fla.; Nashville-Davidson, Tenn.; Indianapolis, Ind.; and San Diego-Carlsbad, Calif., were the most improved over the past year.
Regionally, contract signings fell year over year across all regions, with the Northeast seeing the only month-over-month increase (1.9%), however the PHSI there is at just 85.0. In the Midwest, the PHSI dropped 6% month over month to 99.7, while the South decreased 4.4% to 127.2 and the West saw a 5.4% decrease to 90.0.
