Pending home sales fell by 7.7 percent in April amid rising interest rates, according to new data released Thursday.
Recent figures from the National Association of Realtors (NAR) found that home sales dipped in all four U.S. regions. The group pointed to a drop in the Pending Home Sales Index (PHSI), which it described as its “forward-looking indicator of home sales based on contract signings.”
Lawrence Yun, a chief economist at NAR, cited rising interest rates as a key factor in “dampened home buying, even with more inventory in the market.”
“But the Federal Reserve’s anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply,” Yun added in a statement Thursday.
The numbers come not long after the S&P CoreLogic Case-Shiller national home price index released last month found that home prices rose by 6.4 percent in February, compared to the previous year.
A month before that, home prices saw a 6 percent bump year over year in January, marking the fastest annual growth in more than a year.
“Home prices are hitting record highs, but the pace of gains should decelerate with more supply,” Yun said Thursday. “However, the prospect of measurable home price declines appears minimal.”
In its latest reporting, the NAR said the Northeast PHSI dropped 3.5 percent in April, hitting 62.9, while the Midwest index hit 70.7 last month, marking a 9.5 percent drop. The West index fell 8.5 percent during the same period, hitting 55.9, while the South PHSI hit 88.6, or dropped 7.6 percent.
Yun said Thursday that the markets seeing price declines “will be viewed as second-chance opportunities for buyers to enter the market if those regions continue to add jobs.”
Reacting to the recent data, CoreLogic chief economist Dr. Selma Hepp emphasized what she described as “an important shift in home buying sentiment.”
“This time last year, potential homebuyers had the mentality to get into home buying despite high rates and a lack of homes for sale. With little expectation of interest rates going down in the near term, the mindset today is to wait and see,” Hepp said.
“Households are taking the headlines in and see rising insurance costs and climate change disruptions contributing to the affordability challenges, and that is also having a negative impact on sentiment,” Hepp added.
