U.S. Pending Homes Sales Unexpectedly Decline for a Fourth Month

A gauge of U.S. pending home sales fell unexpectedly in February for a fourth straight month as limited inventory continued to restrict a real estate market that’s now facing another challenge — rising borrowing costs.

The National Association of Realtors’ index of pending home sales decreased 4.1% from a month earlier to an almost two-year low of 104.9, according to data released Friday. Economists in a Bloomberg survey called for a 1% increase.

Contract signings to purchase previously owned U.S. homes fall for fourth month

“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. “It is still an extremely competitive market, but fast-changing conditions regarding affordability are ahead.”

Against a backdrop of a limited number of properties for sale, asking prices remain elevated. That’s going to make homes less affordable considering the average rate on a 30-year fixed mortgage stands at a three-year high of 4.5%.

The Federal Reserve raised interest rates earlier this month for the first time since 2018 and central bankers are projected to continue tightening policy with inflation sitting at a four-decade high.

The NAR said that higher mortgage rates and sustained price appreciation have pushed up mortgage payments by 28% from February of last year.

Monthly Payments

“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,” Yun said.

Contract signings declined in three of the four regions from the prior month, led by a 6% slide in the Midwest. Pending sales fell 5.4% in the West and 4.4% in the South.

Compared with a year earlier, contract signings dropped 5.4% on an unadjusted basis.

The pending home-sales data are often seen as a leading indicator of existing home sales given they typically go under contract a month or two before they’re sold. Sales of previously owned homes fell in February to a six-month low.

Published by Bloomberg

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