Homebuyers again had a hard time snagging a house in April, with signed contracts not budging from the month before, during what is supposed to be the busiest season for buying.
The National Association of Realtors’ index of pending home sales remained at a 78.9 reading in April, posting no change from March when the index unexpectedly tanked 5.2%, according to data released from the National Association of Realtors this week. That was below the 1% gain that Bloomberg economists predicted. On a yearly basis, pending transactions dropped by 20.3%
The gauge, a leading sign of the housing market's health, further accentuates how inventory challenges are thwarting buyers still in the market as elevated mortgage rates convince homeowners to delay their selling plans.
“Not all buying interests are being completed due to limited inventory,” NAR Chief Economist Lawrence Yun wrote in the press release. "Affordability challenges certainly remain and continue to hold back contract signings, but a sizable increase in housing inventory will be critical to get more Americans moving.”
On a monthly basis, contract signings improved in three US regions, but dropped in the Northeast. Still, pending home sales sank in all four regions compared with one year ago.
Contract signings in the Northeast slipped 11.3% from last month and were down 21.8% from April 2022. Pending sales climbed in the Midwest 3.6% in April, down 21.4% from one year ago. The South registered a monthly increase of 0.1% in pending sales in April, sinking 16.7% from the prior year. Activity in the West increased to 4.7% in April, sliding 26.0% from April 2022.
“Minor monthly variations in regional activity are typical,” said Yun.
“The South’s pending home sales activity is similar to that of 2001, but the Midwest’s activity has decreased by 22% in that same period, and the Northeast and West regions are both about 40% lower than they were in 2001,” Yun added.
The results show that the spring selling season didn’t start with a bang. A big factor weighing on the market is the shortage of homes in the resale market, a longtime trend made worse by rising mortgage rates.
In April, the average rate on the 30-year fixed mortgage ranged from 6.27% to 6.43%, according to Freddie Mac, with the rate climbing higher as the month progressed. Buyers this month continue to feel the brunt of higher rates, with the rate on the average 30-year fixed mortgage jumping to 6.57% this week, up from 6.39% the week ended May 25, according to Freddie Mac.
Those higher rates have affected the market in two ways.
First, affordability has deteriorated for buyers. The national median payment applied for by buyers increased 0.9% to $2,112 from $2,093 in March, according to new data Thursday from the Mortgage Bankers Association.
“While consumers are beginning to adjust to the reality of higher mortgage rates, affordability remains significantly constrained compared with one year ago," Odeta Kushi, First American Deputy Chief Economist, wrote in a statement.
That's kept many buyers on the sidelines, while others have been enticed back to the new home market by deals provided by homebuilders.
"Additionally, higher mortgage rates are keeping existing homeowners rate locked-in and limiting inventory," Kushi added.
Around 90% of homeowners with mortgages have a rate below 5%, far better than the prevailing rate, according to Toll Brothers CEO Doug Yearley.
"Existing homeowners are reluctant to give up their low rate mortgages, which has led to historically tight resale inventories," Yearley said this week on the company's earnings call.
Total housing inventory climbed to 1.04 million units of existing homes in April, up 7.2% from March's figure and down just 1% from a year ago, the NAR reported. But that seasonal increase is smaller than historical average of 10%.
April's supply of homes sat at 2.9 months, better than in March and a year ago, but far below the 6-month supply that is considered a healthy market.
"You can’t buy what’s not for sale,” Kushi said.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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